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including enhanced risk management in the form of hedge accounting, reporting and stress testing,” says Van Name. “Our clients also look increasingly for transparency, best execution and advanced analytics to measure everything from back testing trade strategies to technical analysis and relative value. Tey also seek solutions that enhance their execution workflow, like order staging and deal capture.”
Personalisation
Given that different customer sectors require different functionality and tools, platform providers are spending an increasing amount of time personalising their products, says Van Name. “Personalisation is key because while there are similarities in the FX products traded by all market segments, there are also unique differences in their individual needs. Corporate treasurers and money managers seek pre and post trade allocations, cross asset analytics and STP. Risk managers need compliance tools, reporting and stress testing, while traders demand product range, liquidity and low latency. Each segment requires a robust and flexible platform that integrates execution into native workflow.”
Aside from the effort to be ever more client-focused, the other big issue for e-FX providers to take note of
is the development of the regulatory environment and how the changing requirements should be reflected in their product offerings. “While the market awaits final interpretation of Dodd –Frank regulation, the inevitability of clearing cannot be denied,” says Van Name. “E-FX providers are investing heavily in Swap Exchange Facilities (SEFs), clearing and reporting infrastructure, initially for Non-Deliverable Forwards (NDFs), and eventually for FX options. Tis effort and expense is not trivial, yet will cover a relatively small segment of the vast FX market. Bloomberg has been fully engaged with the Commodities Futures Trading Commission (CFTC), Securities Exchange Commission (SEC) and US Treasury throughout the rule making process, and is focused intently on providing a minimally disruptive transition for clients to execute non-exempt trades over its multi-asset SEF, which will also provide liquidity for Interest Rate Swap (IRS) and Credit Default Swaps (CDS) transactions.”
Client input
UK-based Lloyds Bank launched its own electronic platform for FX and money markets in July 2011. Te development of Arena was a year-long process and one that relied heavily on client input, says Lucian Lauerman, head of eCommerce Product Management for Wholesale Banking & Markets. “Arena is a service- led proposition. Te development was user-led both in terms of creating the GUI and in the services that we offered and we continue to run client advisory groups. It is important that the clients were able to tell us what they wanted in terms of navigating their way around the platform and in the way they interacted with us.”
Originally, says Lauerman, many banks saw e-commerce platforms as a way of gaining scale and reducing headcount by automating what had up to then been a heavily manual way of trading. “Now banks have realised that the e-commerce platforms are a way to create a deeper and more engaged relationship with clients. Tis is the whole point of Arena.”
Tod Van Name
“Buy-side clients demand flexible trading access to deep liquidity and robust trading tools, including pre and post trade allocation, staging, netting, algorithmic trading, portfolio management, full audit trails and of course, straight through processing.”
Te kind of services that are able to strengthen client relationships include integrating research and market commentary with execution capabilities as well as combining risk analytics with execution. “Tese are not the kind of services that you can just drop in, they have to be interoperable.” Another service that is in the process o being added to the platform is the ability to integrate transactional banking services, including balance reporting. “Arena is not simply an FX and money markets platform. We are starting to offer services from across our Wholesale Banking and Markets division. Tis builds on existing cross-asset
april 2012 e-FOREX | 23
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