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While fundamentals and post- trade automation are becoming prerequisites for hedge fund users, pre-trade features (alerts, analytics) were rated lowest in importance. Tis suggests that banks need to focus on the core of their platforms before investing in pre-trade functions such as research and analytics. However, survey results show that among top platforms, pre-trade features can provide differentiation.
Finally, survey results suggest that cross-asset trading is gaining in importance. A quarter of respondents indicated that they trade other asset classes such as precious metals via their single dealer platforms, often
this a key part of the single dealer platform offering for hedge funds. For example, Bank of America has recently re-launched an FX options platform as part of their eFX trading capability. Two years ago, options barely featured in the single dealer platform market, making up just 1% of average daily volume. Tough the FX platform survey does not give an indication of volumes for each type of traded product, compared to the market as a whole, the survey results are weighted toward trading of spot. For example, the Bank for International Settlements reports that FX swaps typically make up about 45% of average daily volumes, but much of this is traded by voice and/or on the interdealer market.
What do end-users want in a single dealer platform? Respondents indicated that price, latency and liquidity are the most important features when selecting a single dealer platform, a result similar to previous analyses conducted by Lab49. STP to internal systems was also rated nearly as high, indicating the importance of automated processing for hedge fund clients. For many hedge funds, STP could be considered the ‘4th fundamental.’ Usability (ease of deployment and customisability) and post- trade functionality are considered at a second level of importance suggesting that users are welcoming the shift to thin-client SDPs.
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in conjunction with FX trades. Respondents gave the top platforms below average scores for their ability to provide cross-asset margining, which is coming increasingly into focus. eCommerce departments need to begin thinking about how they can provide this type of service as it is becoming increasingly important to those clients who trade cross-asset.
Single Dealer Platform Rankings
How did individual SDPs measure up to client expectations? Hedge Fund users reported using Autobahn most frequently, followed by BARX. Other leading platforms fell broadly into two groups.
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