OTC trading platform of the year: BNP Paribas

Risk Awards 2025: French bank raises Cortex from nadir of pandemic through partnerships and cohesive strategy

Left to right: Nick Hamilton, Joe Nash and Asif Razaq

Photo: Juno Snowdon

When Cortex’s market share dipped below 2% during the pandemic, BNP Paribas took a hard look at the future of its trading platform.

At a meeting in early 2020, the strategy for the platform was questioned and all options were on the table – including shutting it down.

“There were some genuinely difficult conversations – do we want to carry on investing in this? If so, why? That was a real turning point for the platform,” says Joe Nash, the bank’s head of digital for foreign exchange, rates and commodities.

In the end, the ‘why’ boiled down to the fact that around 20% of FX volumes go through single-dealer platforms – making it difficult for any bank to become a top-three liquidity provider without one. A renewed push followed, in which the FX market share for Cortex peaked at around 13%. Today, it stands at roughly 11%.

Post that conversation in 2020, other banks maybe pulled back, but we doubled down

Nick Hamilton, BNP Paribas

The strategy stands in contrast to others who have struggled to justify building – and maintaining – portals to attract clients. As Risk.net reported this year, fewer banks are betting on the long-term future of SDPs that face stiff competition from multi-dealer platforms (MDPs). The latter may not always be home to the best prices, but they make it easier for clients to show that they tried to get the best price – by requesting a quote from a number of dealers, rather than taking the price available on an SDP.

When Cortex first went live, dealer platforms essentially stood out by their pricing. But BNP Paribas recognised Cortex also needed to be a way to access the bank’s research and pre-trade analytics. The bank differentiated itself further with the introduction of digital trading assistant AliX, to translate analytics into plain English.

Following its self-examination in 2020, the bank went further, migrating to HTML5 from Silverlight, releasing a new version of AliX to preserve valuable screen real estate, making investments in its algos, and adding better quality electronic pricing for spot, swaps and options.

Nick Hamilton, BNP Paribas’s head of Emea electronic and digital platform distribution, says: “We could have backed away. We didn’t. Post that conversation in 2020, other banks maybe pulled back, but we doubled down. What’s helped us to do that? Definitely all the analytics and additional functionality, such as AliX. But the backbone of the pricing is something we’ve heavily invested in as well.”

An FX portfolio manager at a large hedge fund says Cortex is “great in terms of pricing, particularly for FX swaps. I have MDPs and them up at the same time. They’re the only single-dealer platform I have up”.

But those difficult conversations about the future of Cortex didn’t just prompt the bank to do a little more, a little better – they also prompted a change of tack. Rather than seeing its SDP as a destination, and expecting clients to come and visit, today’s Cortex is willing to go wherever the clients are.

All the MDPs are now jumping on the bandwagon and making a space for banks to host solutions

Asif Razaq, BNP Paribas

That means being open to housing bits of Cortex on an MDP. In theory, this could attract more business to the venue, while allowing BNP Paribas to capture more of it. Bloomberg has been first to partner.

The bank took this step in order to reach firms with best execution rules that bar them from using SDPs. Asif Razaq, BNP Paribas’s global head of FX algo execution, says: “It became an annoyance for us, because we built all these very cool tools we can’t deliver to our clients.”

The solution was to make it “painless” for clients to use Cortex functionality through Bloomberg via a single sign-on. “So they still execute on their MDP of choice, but we have the trade details populate within Cortex. It doesn’t compete with the MDP business, but gives clients access to its value-added services like analytics and AliX.”

The result for the bank has been that clients are more inclined to use its algo on Bloomberg, as opposed to any other bank’s. And it’s a win for Bloomberg, which offers something none of the other MDPs offer, says the bank. BNP Paribas’s algo is available via other MDPs like 360T, FXall and FX Connect, but only Bloomberg has access to all of Cortex’s post-trade analytics.

“The client pays the algo fee to BNP Paribas, and we pay brokerage to Bloomberg as per the regular brokerage schedule, and a portion of the fee goes to BNP Paribas,” explains Razaq. Bloomberg is also paid a fee to host the bank’s app. “All the MDPs are now jumping on the bandwagon and making a space for banks to host solutions.”

More recently, SDPs are seeing new competition not just from MDPs but from the buy side. Hedge fund Millennium offers an outsourcing service for spot, forwards, rolls and NDFs. Hedge fund BlueCrest offers currency trading platform BlueX for spot FX and forwards.

The team at BNP Paribas describes these as “niche” entrants, noting that Cortex has the weight of the BNP Paribas balance sheet behind it, and offers prices in FX swaps and options, as well as rates and commodities.

Cross-asset success

The bank’s investment in Cortex has acted as a springboard to better develop its offerings in other asset classes.

The opportunity was moulded around BNP Paribas’s 2022 restructuring of six distinct markets divisions into three – FX, rates and commodities were folded into a global macro division, for example. It also mirrors the growth of cross-asset teams on the buy side.

The single gateway into the bank’s electronic offering now opens onto multiple liquidity pools. The commodities pool – Cortex CD – offers over 600 different underlyings and is popular with corporates.

The rates platform existed in various formats before Cortex FX came into being in 2012. Cortex Rates has approximately 25 external financial institutions, commercial EU-based banks, that use the platform for trading interest rate swaps, options and standard exotics as well as FX options and hybrid structures, with user numbers continuing to grow.

 

In 2019, BNP Paribas acquired Deutsche Bank’s equities global electronic platform, which was rolled into Cortex at the end of 2021. In 2022, BNP Paribas completed the acquisition of Exane, which allowed it to integrate its execution algos into Cortex Equities.

A trader at a European regional bank says 60 of its staff use Cortex across commodities, interest rates and FX. He praises the unparalleled reach of its commodities products, the ability to trade rates swaps with amortisation as well as complex products like caps, floors, swaps with a knockout, and options on rates. The regional bank’s structured team also uses Smart Derivatives, a digital one-stop-shop to manage the lifecycle of structured products. “As far as I know, only BNP is proposing such a tool with so much data and underlyings available,” says the trader. BNP Paribas is definitely the most advanced “technology-wise and price-wise”, he adds.

Across the piece, the share of Cortex’s monthly users active in more than one asset class is on the up: roughly 25% trade electronically on rates as well as FX electronically, and 40% trade commodities hedges as well as FX. Nash says: “Virtually all clients are to some degree becoming multi-asset, due to rationalisation, electronification, digitalisation, whatever you want to call it.”

A trading head at a second large hedge fund says cross-asset platforms are appealing for multi-strategy funds to reduce fragmentation of workflows: “You can’t have a dedicated user interface for every asset class, so the sooner the market can get to one-stop shopping, particularly for large scale, systematic investment managers that trade a lot of different things and a lot of different spaces, that’s appealing.” There is also potential for cross-pollination of ideas across tech stacks for different asset classes, he adds.

Virtually all clients are to some degree becoming multi-asset, due to rationalisation, electronification, digitalisation, whatever you want to call it

Joe Nash, BNP Paribas

An example of cross-pollination includes the importation of the concept of algo wheels from the cash equities market into FX, listed and rates, says Brian Fagen, co-head cash equities markets Americas at BNP Paribas: “You might have four providers on a particular wheel. And if you come in fourth two periods in a row, you get put on the sideline, and they put somebody else in. But if your algo gets picked and it performs really well, you’ll get a larger portion of the wheel.”

Another example is meeting one of the big gaps in the market the bank sees – the struggle for FX liquidity in the listed space. To that end, it has enabled clients to send in a future and convert that order within BNP Paribas into an OTC algo, where they can take advantage of the better liquidity conditions and, upon completion, translate that back into a futures fill. The bank has just released a benchmark product as well, where clients can send an order in futures format, receive the WM/Reuters benchmark fill, and the bank will confirm that back in futures format.

Although not the first bank to do this type of hybrid execution, BNP Paribas has automated the entire straight-though process with no manual workarounds.

Pragmatic approach

Yet the subtle way in which Cortex has evolved in response to client needs means the brand has become less visible.

Two equities asset managers, for example, are not even aware they are using Cortex.

The head of equities execution at a large asset manager, says: “I’m not sure specifically what Cortex is or does, or that we use it.”

But, he says, BNP Paribas “occupies a unique position in the ecosystem as the large bank of choice among non-US banks. I think they are rapidly becoming the bank of choice because they have expertise in it. They’re a strong trading partner and we don’t have many. If you’re in that group that does the lion’s share of our business, you’re performing well”.

An equity trader at a second large asset manager is also “not familiar necessarily with the applications that they use on their end, so specifically Cortex”.

But he praises the stability of BNP Paribas’s platform, “and that includes everything from connectivity and technology to the content that it delivers, people’s ability to execute on our behalf, using their platform. There are certain platforms that breed more confidence than others, and BNP Paribas’s platform certainly is one that over time we’ve appreciated as a trusted partner”.

BNP Paribas says most equity electronic clients are less familiar with the Cortex brand because they access the underlying algos via their proprietary or vendor execution/order management system in order to facilitate trading on the platform. 

Fagen explains that clients trading in equities are more conscious of the mother brand BNP Paribas, or at a more granular level with “the strategy or algo that they’re choosing”.