SECURITIES DIVISION

Presentation for Stanford University

2020: An Algo Odyssey

November 2020

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Confidential

Electronic FX Markets and Algos

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ConfidentialLiquid currency pairsDaily volumes

Average Top of Book Spread (EURGBP example)

Significant day on day changes in volumes executed electronically. Uneven distribution of volumes across currency pairs.

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ConfidentialMarket Microstructure IKey Indicators: Market Volumes and Bid-Offer Spread

Average Top of Book Spread (EURGBP example) Minute by Minute Intraday volume charts (EURUSD

example)

Pick high-volume periods of the day where possible for Pegged

and Hybrid Execution

Wider top-of-book spread favours faster settings in Pegged algo

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ConfidentialMarket Microstructure IIKey Indicators: Orderbook Depth and Imbalance

Seasonal / intraday orderbook imbalance (EURUSD

example)

Intraday orderbook depth (EURGBP

example)

Orderbook depth is key to minimizing implementation shortfall of

sweep-to-fill algos like Dynamic Aggressive

In markets with a significant orderbook imbalance, there is

potential price pressure that may favour an Iceberg

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Adaptive aggress logic for dynamic hybrid

Market seasonality and variability

FX markets exhibit

• intra-day variability,

• intra-week seasonality,

• event-driven changes

• month-end, quarter-end effects…

Intra-day top-of-book spread (HK time)

Distribution of daily EURUSD volume

by day of the week

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. Past performance is not indicative of future results.

Data source: EBS, Reuters. Data period: 05-Oct-2014 to 04-Oct-2019.

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Mircrostrucure impact on algosLiquidity supply and demand and intro to algos

Orderbook Depth Market ActivityAlgo Favoured by Live

Liquidity Conditions

HIGH HIGH Dynamic Aggressive

NORMAL HIGH Dynamic Hybrid Slower

LOW HIGH Pegged Passive

HIGH NORMAL Dynamic Aggressive

NORMAL NORMAL Dynamic Hybrid Normal

LOW NORMAL Pegged Neutral

HIGH LOW Dynamic Aggressive

NORMAL LOW Dynamic Hybrid Faster

LOW LOW Pegged Aggressive

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New Markets, New Algos

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Adaptive aggress logic for dynamic hybrid

Algos Learning from Algos I

• Slower/normal/faster modes of dynamic hybrid target given probability of aggressing top of book

• Dynamic model uses a live metric of its aggress rate to update the aggress parameter in real time.

• What constitutes a better model:

• Mean closer to the target aggress probability

• Standard deviation smaller

NFP

Aggress parameter over time

on NFP day

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. Past performance is not indicative of future results.

Data source: EBS, Reuters, GS. Data period: Jan 2019 to the present.

Pro

babili

ty d

ensity

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Dynamic Aggressive and Iceberg Sweep to Fill Logic

Algos Learning from Algos II

• Pre-trade analytics on TED (right) estimates

liquidity supply as a function of orderbook depth

• Use first wave of algo aggress logic to verify the

liquidity shown, or make adjustments as needed

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. Past performance is not indicative of future results.

Data source: GS. Data period: Jan 2019 to the present.

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Dynamic execution of NDF currenices

Smart NDF Algos

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or complete;

however we are not responsible for errors or omissions that may occur. Data source: GS, primary markets. For illustrative purposes only.

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Portfolio execution for FX

FX Basket algos

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

21:36.0 28:48.0 36:00.0 43:12.0 50:24.0 57:36.0 04:48.0 12:00.0 19:12.0

USDCHF

USDNOK

EURAUD

EURCAD

CADJPY

USDCAD

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. For illustrative purposes only.

Data source: GS.

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Trailing legs, detached legs

FX Basket algos

three normal,

one trailing,

one detached

leg

three detached

legs

Trailing leg

Detached leg

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. For illustrative purposes only.

Data source: GS.

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Confidential

Gamma strategies and KI/KO conditions

Algos for FX options traders

The information provided herein was supplied in good faith based on information which we believe, but do not guarantee, to be accurate or

complete; however we are not responsible for errors or omissions that may occur. For illustrative purposes only.

Data source: GS.