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efficiently aligned both from a balance sheet and cross asset capability perspective. Internal alignments are expected to be passed onto the client as the new market structure normalizes over the coming years.
He says: “Clients are also asking about having a consolidated offering for both cleared and uncleared portfolios. Teir ask is post trade but increasingly they are asking for pre trade capabilities such as portfolio scenario analysis or algorithmic execution.” For Vitale, 2012 will be year spent finalising the new rules of market structure, establishing what role FX prime brokers will play in interacting with the CCPs and SEFs, and most importantly implementing the mechanics for clients.
Jason Vitale
“Clients are also asking about having a consolidated offering for both cleared and uncleared
portfolios. Teir ask is post trade but increasingly they are asking for pre trade capabilities such as portfolio scenario analysis or algorithmic execution.”
driver of client needs as global regulatory reform is implemented.
He says: “Increasingly clients are realising there is a storm on the horizon, either due to regulatory change or overall changes to market structure. Tis leads to a higher cost of capital, margin and funding to support these businesses as they are now. With the higher costs to do business, I truly believe we will go from being a tool to incentivise execution to a necessary platform by which the clients can continue to do business.”
Building for future needs
Vitale says the FX market is working hard to interpret new regulations and to build the tools and infrastructure needed to implement. Tis is in spite of the fact that the final scope of the new regulatory environment, in terms of the rules and time-lines have not yet been fully hammered out.
Clients are looking ahead, he adds, and know that process changes and higher costs are coming so they want to know that their service providers are
88 | april 2012 e-FOREX
“Now that we have built the internal infrastructure, the next stage will be about focusing on clients to make sure we are building the right internal building block solutions for them, in readiness for beta testing and going live. Historically prime brokerage was built for hedge funds and alternative managers, but next year there could be a heavy ramp up of the industry as all financial institutions and a selection of large corporates will be impacted by the new regulatory regime. Te wider financial institutional market will be able to be benefit from the services FXPB has evolved over the past 15 years,” he adds.
Vitale says that the potentially larger client base for FX prime brokerage services means that the challenge will be to find ways to continue offering an efficient, wholesale platform to clients with the feel of a boutique-type client service model.
New client segments
Ed Pla, global head of FX Prime Brokerage and Clearing at UBS, believes that demand for FXPB continues to be driven by clients who derive substantial value from the ability to access fragmented liquidity and from the operational efficiencies relating to legal, collateral, margin, reporting, etc. However, with OTC clearing for FX products on the horizon, UBS is also seeing interest from clients who have not previously used an FX prime broker. He says: “Tey view FXPB as an ‘implementation step’ or a way for them to prepare for a world in which FXPB and FX central clearing are used as complementary post trade services, just as intermediation is being used by some hedge funds to complement the central clearing of IRS and CDS.”
Pla believes that technology expertise is an indispensible part of the FXPB package, in a business
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