Asia Awards 2021: Best AI initiative—Credit Suisse

Credit Suisse wins the best artificial intelligence (AI) initiative category at this year’s WatersTechnology Asia Awards for its AI-based Recurrent Neural Network (RNN) electronic Macro (eMacro) pricer. The second generation of the AI-based pricing engine was introduced in 2020 and has become a core part of Credit Suisse’s market-making operation in foreign exchange (FX), precious metals and US Treasuries. 

While AI engines are typical these days in financial price forecasting, Credit Suisse has set itself apart by offering a low-latency, client-facing system that can also operate under strict controls. Clients benefit from tighter bid-offer spreads, deeper liquidity, and reduced market impact, according to the firm. “While the most common investment approach in the market was to favor speed of execution and attractive user-interfaces, Credit Suisse invested in an AI research and development program that focuses on smarter pricing at a very early stage in the cycle,” explains Alexandre Manakyan, co-head of international eMacro trading. “Today, the resulting pricing quality of our eMacro platform is directly benefiting our clients, and this puts us ahead of the curve in the industry.”

The AI engine is able to make short-term market forecasts in both asset prices and volatility, based on more than a hundred market observables that capture liquidity, microstructural formations and cross-asset dynamics. Based on these forecasts, the pricing engine skews prices up or down, while slowing down the pace of hedging in order to hold on to good risk for longer periods of time. 

The solution is also able to offer a better execution experience and lower transaction costs, which are critical for clients faced with lower liquidity conditions during Asian trading hours. “Our AI pricer efficiently reduces bid-offer spreads for clients, thanks to our unique exotic axes, while allowing us to provide very competitive pricing across all sizes,” says Alan Ng, co-head of eMacro solutions sales. “Through the benefits of scale and internalization, diminished market impact allows us to pass on execution savings to clients and creates a virtuous cycle.”

According to Manakyan, Credit Suisse is not resting on its laurels after this win and a variety of new projects are underway for its pricing engine over the remainder of 2021 and beyond. “The next generation of our AI pricer will extend the forecasts to cross-currencies and handle some of the less liquid market structures,” he says. “At the same time, the R&D cycle continues to focus on interpreting and pricing news flow.”

Other improvements on the cards include functionality to quote prices without a market, allowing clients to deal around the clock in instruments that used to be available only during set periods.