REGIONAL e-FX PERSPECTIVE
is adequate to facilitate it. What is happening in South Africa today is likely to fl ow through to the broader African region in years to come. Moreover with commodity prices refl ecting continued global concerns over the fi nite size of available resources, increased income to mineral rich exporting territories to fund imports and infrastructure development is certainly on the cards.
“We see particular growth in demand and liquidity from Nigeria and Kenya,” explains Richard de Roos Head of Foreign Exchange at Standard Bank. “But deals sizes are small. “In Rand we can deal in clips of up to US$250m and also stream prices in tens of millions. For the other African currencies we also stream prices into our own system as well as to aggregators such as 360T but up to sizes of about US$3m. Moreover, sometimes liquidity in these the markets can be a little one sided and so you can only show prices on one side. On the buy side, given the sizes of the equity and bond markets we tend not to see demand for clips of more than about US$5m. When we do see demand we will either work the deal or quote prices depending on the liquidity at the time.”
He goes on to say that the smaller markets are Mauritius, Botswana, Zambia, Uganda but these are extremely small and Standard Bank concentrates on order fi lling rather than streaming prices. It concentrates on Anglophone areas of sub-Saharan Africa and the Lusophone markets of Angola and Mozambique.
SA leads the continent
South Africa remains the continent’s leading foreign exchange trading nation centred on Johannesburg. With a share of turnover in the domestic Rand between 30% and 35% de Roos believes Standard Bank is the market leader. However even in this most advanced of African countries, e-FX is still in relative infancy when compared with Europe and North America.
“Even in South Africa with the market infl uenced by the legacy of exchange control, the market is dominated by the corporate rather than by the
70 | april 2012 e-FOREX
investor community. T e investor community here are not really big players in the foreign exchange markets. T ere are no institutions in the SA market or in the African continent that I know of who are actively trading in currency as an asset class,” says de Roos.
However this has not prevented banks making e-trading channels available to all of their customers. Standard off ers its E-Market Trader, which is widely used by the corporate market. T ey also use this to distribute to banks mainly on the African continent as well as to their own internal sales offi ces around the globe. “We have the ability to stream prices in US$-Rand and its crosses in G10 currencies on E-Market Trader. We also use this to distribute to the pockets of liquidity that there are in the other African currencies. T is works well where it can be associated with a strong brand and is largely therefore on the African continent.”
T e bank also has a product called Standard FX Trader, which is a white label agreement with Gain Capital and is used to distribute to individuals such as day traders.
Rivals Absa Capital are able to
leverage the 55.5% shareholding held in them by Barclays Bank PLC in a number of ways, both in the domestic South African
market and in the continent as whole.
“We run the sub-Sahara Africa currency book for Absa and for Barclays,” explains
James Scott Absa Capital’s Head of FX Sales and eCommerce. “We are the price distribution source for all of the sub-Saharan Africa currencies and also cover risk management. Johannesburg is our hub and we leverage the Absa and Barclays branches throughout Africa to further distribute product. We off er pricing in the more liquid of these currencies to our South African client base as well as price those to Barclays electronic client base. T is could be to a UK asset manager looking to do some Kenyan or to a South African corporate looking to hedge Ugandan. We publish a price as long as there is liquidity in it.” He adds however, “In each of the domestic markets you currently wouldn’t fi nd that there is much demand from local banks to develop electronic trading at the moment.”
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