FEATURE
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While the process is ongoing, Merlin currently provides the ability to trade strips of vanilla and first- generation exotics alongside other more sophisticated products.
Additionally, about a year ago, Credit Suisse launched an automated securitisation platform which enables users to trade securitised FX strategies more easily. Joerg Schmuecker, Head of Fixed Income Derivatives E-Commerce, at Credit Suisse says: “Tis enables clients to choose the details of a trade and, with the click of a button, execute a transaction which automatically settles through Clearstream or Euroclear without the client needing any specific back office capabilities,”
Zohar Hod “Te real time aspects of trading FX options, the
ability to execute on a multi-dealer platform, the ability to reduce operational risk and enhance the workflow electronically and finally the delivery of these platforms over a cloud is where I see the future going and where I see the changes in the market coming.”
will reduce banks’ profitability because the process will become more electronic but at the same time it will allow them to look at their clients’ exposure and give them some advantage to centralise assets.”
High frequency trading and algorithms will also come into focus for FX options, Hod says, although it would be a little premature to say that it is happening now, due to the lack of transparency. It will take between three to five years from a technology perspective and from what the dealers are going to allow – when algorithmic trading first came into the equity market many dealers blocked those algorithms. “Te risk versus the rewards for the dealers and for the participants in the market is still not there for FX options,” he says.
Single platform initiatives
One major player in this market, Credit Suisse, is in the midst of incorporating its FX options platform, Merlin, under Credit Suisse PLUS, a suite of innovative client-focused electronic solutions which brings together the bank’s research, analytics, trading and execution capabilities for fixed income clients.
46 | january 2012 e-FOREX
Schmuecker says the bank is getting positive feedback from the roll-out of Locus, a bespoke Credit Suisse platform, providing live and historic data, research tools, and pricing engines for the foreign exchange market as well as other asset classes. Tis solution provides easy access to a vast range of market information that can impact exchange rates and delivers the tools and data needed for trading
All of these analytical tools will be accessible through Credit Suisse PLUS, and Schmuecker says that, together with Merlin, this will provide clients a powerful execution solution for FX options, giving them access to historical analysis on how volatility has moved as well as offering other tools all under one roof.
Client needs
By expanding the product range, Schmuecker says the bank is more able to provide for differing client needs. For example, corporates tend to trade structures that are subject to hedge accounting rules so the bank has added products to accommodate this. “Furthermore, we have built the securitisation platform specifically for third party agent banks, so they have an easy way of getting access to structured products without having to implement OTC settlement systems and related infrastructure, whereas hedge funds, and other relative value players, are more interested in Locus and Merlin because they bring together execution, research and analytics. For every group of customers, we are looking to develop the right products and bring them together under the Credit Suisse PLUS umbrella,” says Schmuecker.
In some cases, catering to different client needs simply means building a different GUI (Graphical User Interface) to the same product, says Schmuecker.
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