FEATURE
develop better platforms. Unless investment is made to other platforms on feature quality users are expected to gradually migrate towards other platforms that better deliver features that clients demand. Some of these platforms could emerge as sustainably dominant platforms as their high quality platforms lead to greater liquidity and market share.
However, no single platform stood out for achieving high marks across all feature categories. Interestingly, Autobahn received its highest marks for pre-trade features such as alerts and news, research and analytics capabilities (demonstrating that this can make a difference among top platforms). However, results indicate that there is room for improvement in post-trade features and usability, particularly ease of deployment. Tis may reflect the thick-client nature of the Autobahn application. Respondents rated BARX most highly for its depth of book and its perceived strength in execution algorithms and advanced execution features.
Generally, the top platforms received below average marks for feature quality across the trading lifecycle. Users rated less frequently used platforms higher on nearly all features. Tis can be explained in two ways. First, we believe that many of the lesser-used platforms have small but extremely loyal groups of clients so they tend to receive higher scores. Tose platforms also tend to be newer. Second, hedge funds are demanding clients and will expect the market leaders to continue improving their platforms.
The Future of SDPs
So how should banks be looking to the future in terms of their SDPs? Plotting all single dealer platforms on quality and popularity gives an indication of the expected future evolution of the industry. Top platforms such as Autobahn and BARX—we call them ‘legacy stalwarts’—are vulnerable as other banks
70 | january 2012 e-FOREX
A key area of focus should be the post- trade area, which is important to users but which is generally rated poorly. New regulations will also affect the post-trade process. Advanced platforms currently offer intraday margining and limited cross-asset capabilities. We see the trend moving towards portfolio-based, cross-asset margining, and even the ability to transfer the portfolio across clearing agents (products for which central clearing is mandated). Forward- thinking banks are already building margin functions into their platforms in order to let clients view the portfolio impact of their trade before it is made.
Within execution functionality, new regulations will change the way prices are displayed and executed, particularly for standardised FX derivatives. We expect to see future functionality such as price aggregation across multi-lateral OTC trading venues (SEF aggregation). We also see algorithmic trading leading to high frequency, cross-asset algorithmic trading. Multi-asset hedge funds will also be looking towards platforms that offer true cross-asset trading in one ticket.
Finally, among top platforms, pre-trade can be an area of differentiation. A strong pre-trade offering creates an incentive for clients to give the platform screen real estate. Banks should think about taking research and interactivity to the next level by allowing end-clients to interact with analysts via the platform, and allowing executable modules—charts, artefacts, and messages— that lead directly to execution.
To learn more about the future of single dealer platforms and discuss the 2011 Lab49 FX Platform survey in more detail, please contact Lab49 at
www.lab49.com.
You may also join a free webinar to discuss the results in more detail early in Q1 2012.
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