FEATURE
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some exposure to through the ECN platforms, that a number of regional banks use,” he adds.
Bank of America Merrill Lynch’s business has grown predominantly in the US, and last year it strengthened its business in London to cater for the growth of FXPB in Europe.
Dalton says: “Te business, prior to the merger, was very US focused that was viewed as a bespoke relationship management business where we delivered the whole front end to the client.” Post financial crisis new opportunities have arisen and a significant investment has been made in the eFX space, as well as the FX prime brokerage arena, to give Bank of America Merrill Lynch a more scaleable platform to grow business more significantly..
“A lot of this has to do with the fact the bank has a leading UCITs platform, based in London. Tis is another factor driving growth in FX prime brokerage, alongside our international equity prime brokerage business, which is closely aligned to our current global FXPB offering,” he says.
Regulatory drivers
For Dalton, the biggest driver currently for new mandates from non-traditional clients is the recent financial regulation. “We are seeing that asset managers are looking to FX prime brokerage as a piece of an overall OTC clearing mandate and are looking to partner with derivatives clearing merchants in order to address the Dodd-Frank Bill and how it affects their business in a holistic way,” he adds.
While initially incoming regulation is focusing on credit and interest rate OTC products, it is expected similar regulatory guidelines will follow for clearing FX derivative products.
Dalton says that Bank of America Merrill Lynch has invested heavily in OTC derivatives clearing in the past 18 months and it is partnering with long-term clients and prospects as FX prepares to join the other asset classes and customers look to gain margin offsets and single reporting from providers.
While it was the CTAs and the hedge funds which played a large role in the development of FXPB, Dalton says today it is the asset management sector that is driving new growth. Much of this interest is coming from the impact of the Dodd-Frank Bill.
40 | april 2011 e-FOREX Tony Dalton “Clients need to know that there is a
professional at the end of the line and that is the foundation of our business.”
Additionally, because FX is a borderless asset class, Dalton believes the impact of the rules being written will have a far-reaching impact as FX is brought into the clearing arena.
He adds that FXPB is still a technology play and that the bank’s focus remains on the provision of a scaleable and robust platform. He believes that netting will be an important part of how new FXPB is driven going forward and to this end Bank of America Merrill Lynch has worked with CLS and other providers on the provision of netting services. He says: “EFX is a very important component and we have focused on being a market leader in the provision of these services, in conjunction with FXPB clearing services.”
Levels of commitment
Dalton believes the FXPB customer can measure the level of commitment from their provider by the
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