LSEG’s FXall to open access for banks’ NDF algos

The London Stock Exchange Group’s dealer-to-client foreign exchange platform FXall is set to allow banks’ client execution algorithms for non-deliverable forwards to access its liquidity, sources have told FX Markets.

According to three bank sources, the platform will begin supporting submissions from banks’ NDF execution algorithms from next month.

A spokesperson for LSEG declined to comment.

Bank sources say the move by FXall to support NDF algos could provide a major boost for volumes on the venue, and increase uptake amongst asset managers that prefer to access bank algos through multi-dealer platforms.

“We’ve been banging on [FXall’s] door for a long time, and clients have also been trying to get them to go live. It’s good they are finally coming round to it,” says an FX algo executive at a large US dealer.

NDF algos came to prominence four years ago to meet the needs of an increasingly electronically traded market. After the Covid-19 pandemic led to a surge in use for spot FX algos, banks saw a wave of demand from clients to use algos to trade restricted currencies like the Taiwanese dollar or the Brazilian real.

Banks including Barclays, BNP Paribas, Citi, Goldman Sachs, HSBC and JP Morgan have since added NDFs to their algo arsenals.

Average daily volume of NDFs traded in the UK through electronic brokering systems and platforms has more than doubled between October 2020 and October 2022 to $114 billion, according to the Bank of England. Yet voice trading has persisted, growing by nearly 11% to $22.1 billion.

However, there have been only a handful of platforms that allow buy-side firms to access NDF algos on their venue. One European bank source says the lack of multi-dealer platform support has been one of the main roadblocks to wider NDF algo adoption from buy-siders.

According to a survey of 100 buy-side heads of FX trading in the second quarter of 2022 by market research firm WBR, only 8% said they had adopted NDF algos, while 49% said they were looking at them but had no immediate plans to use them.

“Platforms like FXall and FX Connect did not support NDF algo submissions due to internal constraints. That has stagnated the growth of the NDF algo business because our clients could not access the service through the tools they use,” the bank source says.

The only dealer-to-client platform that enables asset managers to access bank algos for both deliverable and non-deliverable currencies so far has been Bloomberg’s FXGO. However, FXall and FX Connect have faced increased pressure from banks and the buy side to switch on connectivity to NDF algos.

FXall is due to upgrade its technology as part of a wider replatforming to LSEG’s Millennium Exchange architecture.

LSEG is also planning to launch a new NDF matching platform in Singapore later this year, as the exchange aims to capitalise on the region’s growing FX market share.