Bank of America is expanding its automated trading capabilities with the launch of its first algorithm for foreign exchange dealing.
The US west coast bank says its new Trade Weighted Average Price (Twap) algorithm is designed to deliver an average execution price while minimizing market impact. The bank says Twap is in pilot with a select group of users and will be rolled out more broadly over the coming months.
The extension of automated algorithmic trading systems from equities to other asset classes has long been predicted. Bank of America's move follows the release by Citigroup subsidiary Lava Trading of a similar FX dealing program just last week.
Bank of America is reporting growing uptake of its suite of e-FX trading services. During the first half of 2006 the bank says it exceeded 11,000 global users for its FX ETS platform and grew electronic transaction volumes by 90%. Clients can now access liquidity through over 20 platforms, says Scott Freeman, head of FX ETS for Bank of America, including third party destinations such as TradingScreen, FXall, Currenex, 360T and most recently, Integral's FX Inside.
Improvements to pricing and risk management - including the delivery of live options trading over the Web - follow the bank's acquisition at the turn of the year of Massachusetts-based Financial Labs, which specialised in the provision of sophisticated auto-dealing software for foreign exchange.