Citi adds TCA tools to futures and options platform

Marks: good quality historical data is key

Citi has launched a new set of trading features and transaction cost analysis tools on its Citi Futures and Options Execution platform, which it says will give clients better insight into how their orders are being executed.

The new CFOX SE platform contains 17 synthetic order types, four benchmark algorithms, TCA and order monitoring, as well as an inter-market low-latency spread trader. Once opened, it displays details of algorithmic orders in real time and breaks down the cost of executing each trade. The aim is to make execution quality clear to the user.

Futures and options trading has become increasingly electronic in recent years. As with equities, the proportion of algorithmic orders has gradually increased over time, and basic algo types such as the VWAP, TWAP and POV included in the Citi package have proliferated in the market.

Performance is generally measured by comparing the price an order was executed against the best possible price in the market at that time. Algorithms will attempt to find the best available price in the market, which often depends on minimising market impact by concealing a large order as far as possible. Techniques to achieve that often involve slicing an order into many smaller chunks and then executing across multiple venues if these are available, although in the futures and options market there may be less fragmentation than in equities.

Citi rolled out its CFOX SE platform worldwide; users access it via local access points in Europe, North America and Asia. It covers 51 markets in total. According to Paul Marks, global head of electronic trading products for futures, clearing and collateral at Citi, the tools allow users to check their best execution by measuring against various benchmark metrics such as the interval price, the VWAP, the arrival price and settlement price.

While Citi is not the only bank to provide futures and options algo trading and TCA tools, Marks suggests that the bank is seeking to differentiate itself from its competitors by having these abilities directly embedded into the execution platform through its graphical user interface. Other offerings in the market will often involve a browser-based form of TCA which requires the trader to open a website and enter their login details, he said. Other features aimed at making the Citi package easy to use include a warning that appears on the order entry ticket if the trader is trying to use a particular algorithm on an instrument that isn’t sufficiently liquid. Previously, says Marks, a trader might have received a fail in this scenario but it may not have been immediately clear why.

“We are offering institutional clients the types of tools they have been requesting to improve upon their user experience, increasing transparency on how their orders are executed and providing enhanced execution quality and control,” he said. “This will provide clients with the ability to see and amend in real-time all of their futures and options order flow in a single platform, as well as track the performance of execution in real-time.”

Historical data is a key component of the Citi futures and options trading package. According to Marks, it isn’t really possible to design an effective set of algos for use on the futures and options market unless the firm has built up the necessary historical data sets for all the main instruments first. That isn’t an easy task, especially since some illiquid stocks may not have a meaningful historical average – making them difficult for a benchmark algo such as VWAP to trade.

Marks added that he hoped the new platform would prove popular with risk managers, who would benefit from its ability to help them keep a better control on their risk by monitoring orders more closely. With this in mind, the CFOX SE package includes a feature which notifies traders where they are relative to their own pre-set risk limits and any other restrictions that may be active on them.

Citi plans to add more graphical features to the CFOX SE platform before the end of the year.