Streamlining and simplification of FX trading operations with more unified post trade architectures
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clearing houses, CCPs and SEFs. Tis approach does not force clients or clearing firms to change how they trade, but has enabled them to add a clearing facility.
Another feature Traiana has focused on is real time risk management, which has recently been expanded to FX options. Solinger says: “We are still focusing on changes that occur pre-trade and making sure that trades are good before they hit the back office. We aim to protect the back office capacity so it can do what it is meant to do, which is to handle the trade booking and settlement.”
Costs
Te cost per ticket is still very much a focus for the FX industry according to Solinger. Having a good post-trade process before the back office as well as an aggregation solution, such as Traiana’s joint venture with CLS, ensures that only good trades are going into the back office. Te cost of aggregation is also by lowering the cost of capacity. He says: “Tese two features reduce back office costs. Even though settlement costs remain the same, the bigger components of back office cost per ticket are the cost
of capacity and the cost of the manual processes to get the trade right.”
For a bank that trades globally in FX, the number of clearing houses and trade repositories that will come under their remit is quite significant. Tus trading FX globally will require a substantial investment in connectivity. Once Harmony sees a trade, it can be routed to any of the participants, with unique data enrichment added, so all these workflows are supported with very little change to market participants’ internal systems or processes.
Due to the development of the FX prime brokerage model, Solinger believes the FX marketplace has already moved from an end of day batch reconciliation process to near real-time. Now other asset classes are looking at the model that has been built in FX. In the near future Solinger believes FX derivatives will begin to adapt these processes for high-frequency trading because the type of trading activity that occurs in FX derivatives is going to need the same real-time post- trading processes, matching and risk management that was invented for spot, cash FX trading.
For this reason Traiana is investing heavily in automated options processing, automated options exercise processing and NDFs and NDF fixing. “Te trend of expanding into FX derivatives has begun already and the industry is preparing for significant volume increases in FX derivatives over the next three to five years. Tere is going to be whole new set of capacity concerns as notionals get smaller and volumes get higher, and the cost pressures are going to be felt,” he adds. Traiana is preparing for streamlining services for FX derivatives because of the belief that regulatory changes will drive greater volumes on smaller notional sizes.
Taking a fresh look Nick Solinger
“We are still focusing on changes that occur pre-trade and making sure that trades are good before they hit the back office. We aim to protect the back office capacity so it can do what it is meant to do, which is to handle the trade booking and settlement.”
Peter Kriskinans, managing director of DealHub, says that the incoming regulatory requirements provide an ideal opportunity to take a fresh look at the post trade infrastructure as with the new reporting obligations and the resulting routing and data maintenance challenges, it has never been more important to cut down the number of systems, connections and data formats being supported. However, he adds, as there is still a great deal of uncertainty around the final details, DealHub is putting flexibility at the heart of its solutions; modular software that can easily scale, both functionally and operationally, and smart, scriptable routing and workflow that can be quickly adapted in response to a changing environment.
april 2012 e-FOREX | 49
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