e-FX INDUSTRY REPORT
Single-dealer and multi-dealer distribution SDP benefits
In a relatively short period of time single-dealer platforms (SDPs) have become an integral constituent of banks’ electronic market offerings. Tis is particularly true in FX. SDPs are seen as offering a number of key benefits including:
t Enhanced differentiation and service capability t Facilitation of tailored pre-trade and post-trade services
t Integration and multi-product functionality
Te survey results suggest that third-party SDPs are being widely used across all asset classes, with more than 50% of respondents citing some use of vendor solutions. Even for e-trading of FX, where many banks have built their own solution and therefore third-party products appear to be used least, fewer than 50% of firms rely solely on in-house developed platforms.
The ideal solution
Te key features of an ideal electronic trading solution have changed considerably over recent years, with far greater emphasis now being placed on user experience and the necessity to differentiate from the competition. Respondents cited a long list of different features, but three in particular were frequently mentioned:
t (SFBUFS JOUFHSBUJPO DBQBCJMJUZ – to enable the solution to be quickly interfaced and integrated to a variety of in-house modules, components and systems
t .VMUJ QSPEVDU DBQBCJMJUZ – lack of multi- product capability was seen as one of the key
36 | april 2011 e-FOREX
drawbacks of most multi-dealer solutions, so a single-dealer solution that can offer multiple products across multiple asset classes was seen to be highly desirable
t &OIBODFE TFSWJDF DBQBCJMJUZ – with client service being seen as a major differentiation opportunity, the ideal e-Commerce solution must be able to deliver unique content and functionality alongside low latency data handling and seamless on-boarding of clients
Conclusion
While multi-dealer platforms are here to stay, and price discovery, transparency, consistency and reliability are important, other criteria are being assigned equal or greater priority. Tis research indicates a definite trend away from multi-dealer platforms towards single-dealer platforms, driven by the need to differentiate from peers by offering superior customer experience.
While, many banks are exploring this opportunity, the trend is most pronounced at tier-2 firms. Advances in technology, particularly in third-party systems, have helped many smaller firms to implement a single-dealer e-Commerce solution quickly and cost effectively.
In the future, markets will become increasingly competitive and the issue of differentiation will remain key. Investment in intuitive and customisable e-Commerce platforms, that enrich the user experience, will be essential, both to retain market share and attract new customers.
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