Currency derivatives house of the year: Bank of America

Risk Asia Awards 2025

Neelkanth (Piddi) Parekh, BofA Securities

It is 2am in New York, but the trading day is already hours old in Hong Kong. A social media post by the US president, an unexpected election result in Mexico, or a political shock in Turkey hits the news wires. While some houses might struggle to make prices for some emerging market currency pairs at this time, one bank can be relied upon to be out there quoting prices.

“In recent times the markets have been driven by major news events after which the markets in Asia are the first to open,” says Neelkanth (Piddi) Parekh, head of Asia-Pacific FICC sales at BofA Securities in Hong Kong. “The work we did on scaling up how we provide liquidity to clients has really helped in what can be less-liquid time zones.”

There are several standout examples from the past year. Investors were taken by surprise when Claudia Sheinbaum won a supermajority in Mexico’s presidential election last June, leading the Mexican peso to suffer one of its biggest single trading session declines since the pandemic. In March, meanwhile, the Turkish lira lost more than 10% of its value in just a couple of hours after the arrest of Ekrem Imamoglu, the mayor of Istanbul and a Turkish presidential candidate. News of both these events broke at times when only Asia was open for trading.

Ivan Stamenovic, Bank of America

Clients testify to BofA’s dependability as a liquidity provider around many of the big market-moving events from the past 12 months.

“Normally during those events the most important factor for clients is liquidity,” says a foreign exchange options trader at a US hedge fund. “For [BofA] you’ll always get a sensible price if, for example, you want to unwind risk, which is the most important thing for me.”

Bank of America’s ability to make options prices on a range of emerging market (EM) currencies at all hours is helped by having one unified team of EM traders. Unlike some houses, which split EM into regions, BofA has a team actively trading and providing prices for EMs globally.

“For us, EM is EM,” says Ivan Stamenovic, head of APAC G10 Trading at Bank of America in Hong Kong. “We don’t split it into Asia, LatAm, all of our EM traders are trading all the EM. So, when last year, there is the Mexican election result, or this year, there is Turkey mayoral candidate being detained, it all happens in Asia – and we quote all of those trades in Asia.”

Another factor is the breadth and diversity of Bank of America’s growing FXO client base, which helps when it comes to liquidity provision, allowing the bank to internalise most of the flows that come across the FXO desks, adds Parekh.

“We built up a very diversified client base, very consciously, and that does give us the ability to internalise a lot of flows. That’s a big part of it.”

It is a virtuous circle. The more BofA grows its FXO business, the more ability it has to recycle and repackage flows internally; the more ability it has to internalise its FXO flows, the more it is able to achieve sustained growth and offer increasingly scalable solutions.

And BofA’s FXO business in Asia has seen significant growth in Asia over recent years, although the bank declines to share the figures publicly. 

Owning the narratives

One way in which BofA has sought to further differentiate its FXO business in the past 12 months is through a new focus upon data-driven insights.

BofA’s own risk-taking is underpinned by pricing analytics that the trading team uses in decision-making. The idea this past year has to export the trading team’s knowledge, in particular around big market events, in a way that the sales team can use to present ideas to clients.

We figured out how we can translate the language from trader speak into something that’s more consumable for clients

Ivan Stamenovic, BofA Securities

Stamenovic says the insights BofA has produced around big market events – whether related to important elections, central bank meetings or event data calendars – have been one of the big drivers for growth in BofA’s FXO business over the past year.

“We went deep into our trading efforts, where we evaluate trading opportunities on the basis of quantitative strategies, we evaluate events, we look at the potential for variance to change,” says Stamenovic. “And we figured out how we can translate the language from trader speak into something that’s more consumable for clients.”

One example of such analysis was produced ahead of last year’s US Presidential Election, and specifically on the question of whether the market was pricing delayed results. BofA’s traders noted that most of the variance priced into the curve was focused on the November 6 date – the day following the vote – with no additional risk pricing attached to the possibility of delayed results.

“There was almost no distribution on the days behind [November 6],” says Stamenovic. “What that tells you is that if you’re a regular participant, you probably want to be buying a date behind November 6 or, if you’re a very sophisticated participant, you want to be selling November 6 and buying something behind.”

This sort of technical volatility analysis, coming from BofA’s trading desk, then becomes the basis of a narrative for the sales team when they pick up the phone to clients.

Patrick Law, BofA Securities

A portfolio manager from an asset management firm in Hong Kong says that the type of analysis provided by BofA has provided actionable insights for FXO trading.

“The trading color they provide, in terms of, daily commentary, it’s been helpful giving us context,” says the portfolio manager. “As real money asset managers, we’re not actively trading vols day in day out. But they’ve been quite active in providing trading commentary in a digestible way, giving color that we can use to express the positions we might want in the vol format.”

The portfolio manager adds this analysis was especially useful at the end of last year when there was mounting dollar bullishness and dollar vols were picking up.

“How they showed vols across pairs and from a relative and historical perspective, gave us a perspective on how it might trade higher in different scenarios. I think that helped us decide which pair to act on for a long vol expression,” says the portfolio manager.

Patrick Law, head of Asia-Pacific fixed income, currencies and commodities trading at BofA Securities in Hong Kong, says the focus on delivering actionable data-driven insights has been a big factor behind the stellar growth BofA has seen in its FXO business over the past 12 months.

“There’s so many narratives happening,” Law says. “There’s Liberation Day, there’s India-Pakistan tensions, Taiwan lifers, the Korea election. Basically, we own all these narratives, and then we get to be able to pitch ideas to clients, and then we can monetise them through FX options. I think that that’s a big part of how we become successful.”