FEATURE
In a bid to facilitate the better integration of pricing, distribution, analytics and bilateral trading features on to its FX Options platform, Bartter says the bank’s biggest effort was to introduce an options orders platform that completely enhances the pricing and execution experience. “Tis platform addresses both pricing and efficiency by providing a price alternative to the displayed bid/ask spread. Te best value to the client is when their order gets filled within the bid/ask spread,” he adds.
Bartter says that as the FX options market matures there will be a greater divergence between simple vanilla trades and complex structures. On the vanilla side, there is a focus on quick pricing and execution as various platforms now provide streaming pricing similar to FX Spot. “You also have the ability for back-end STP to improve automation,” he adds. “For more complex structures, you are seeing more exotic products being released onto platforms along with enhancements to multi- leg structuring geared toward making the pricing of multi-leg products more intuitive.”
He agrees that the use of complex trade execution techniques involving algorithmic and high frequency FX Options trading is unlikely to be a strong focus for the main price providers in 2012. Bartter believes that price providers are investing most of their time and technology in addressing upcoming regulatory requirements rather than looking to manage individual complex execution streams.
Going forward he believes there will be still further divergence between flow options and complex options. According to Bartter, flow options will continue to focus on enhanced execution whereas complex options will focus less on execution and more on the pricing experience of the client.
As one of the first to market, Bartter believes Deutsche Bank has already dramatically changed the way the market trades FX options. He says: “We were the first platform to roll out an Automated Options Order Book. Tis is a major change to the way options can be executed on electronic platforms by allowing clients to request specific interests directly to the trading
52 | january 2012 e-FOREX
desk. It also allows you to manage a specific interest over several time zones.”
More accessible
Likewise, the first licensed operator in the forex market in Poland, TMS Brokers, is utilising more sophisticated technology to offer access to make spot, forwards and currency options, instruments that were until recently available only to banks and large international corporations, more widely accessible to new users.
Mariusz Potaczała, Chief Executive Officer, President of the Management Board, at Polish FX, CDS and derivatives brokerage firm, TMS Brokers, says that uncertainty about future exchange rates is encouraging more and more importers /exporters to take some action to eliminate, or at least reduce, the risk of adverse currency fluctuations and that small and medium sized companies are increasingly hedging currency risk by using currency forwards and options, because they can trade them using electronic trading platforms, like TMS Direct.
He says: “Most financial institutions, which provide foreign exchange advisory services, offer clients hedging strategies based on forward contracts, currency options and their various combinations and advisory services providers
focus on matching the opening and closing the forward transactions or develop more sophisticated strategies based on combinations of options and currency forwards.”
Due to rising foreign revenues of Polish enterprises, the higher exchange rate volatility, as well as the dismissing perspective of the Polish accession to euro zone/ monetary union, Potaczała says it is expected that there will be increased demand from Polish companies for hedging business strategies. “What makes these more popular is also the fact that the rising foreign exchange risk directly affects the financial results of companies at the operational level. It seems that companies are increasingly willing to cooperate with independent advisors who will assist them in decisions on professional currency risk management,” he adds.
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