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FEATURE


and analytics but I don’t think there is much demand for mobile execution services. In fact regulation and internal policies often prohibit trading being executed by mobile or by any other means outside of a firm’s network.”


Deutsche Bank is providing more pre and post-trade analytics to clients, says O’Flaherty, but human interaction still remains an important part of the service. “Analytics can only do so much so it is important to have that human interaction. We want the platform to give clients an insight into our FX trading rather than just push them information. So we still encourage our sales team to talk to their clients. Tey may trade electronically and benefit from full STP and an electronic audit trail and better workflow but they still want to talk to traders and feel involved.”


Pricing, product and distribution


According to Nicholas Barker, e-commerce product manager at RBS Markets, the key to a successful FX e-commerce service is a combination of three factors – pricing, product and distribution – and ensuring that these factors are continually in balance and delivered as a cohesive unit. Underpinning these properties should be reliable technology, a large market presence and sound risk management, adds his colleague Ed Mount, head of technology trading for FX at the bank.


“Many of the new players in the FX e-commerce space tend to lead with pricing and very tight margins in order to quickly attract short-term volume,” says Mount. “But the longer-term players are able to balance price with proper risk management and get more consistent pricing over a longer time because a large market presence combined with good risk management is what creates the best price. If clients choose platforms developed by providers that are chasing short-term business but are not committed to the underlying market, then those relationships will be short-lived.”


A large market presence also helps, not just in ensuring favourable pricing but also in the ability to distribute the product to a diverse client base rather than focusing on a specific client sector. “It would be easy to go out and target high frequency traders which would give you a lot of volume but not a balanced portfolio. You need that diversity of clients to be able to offset flow and help improve risk management,” says Barker.


Managing the balance between pricing, product and distribution is affected as much by changing regulations and market structure as by clients’


40 | july 2012 e-FOREX Nick Barker “It would be easy to go out and target high frequency


traders which would give you a lot of volume but not a balanced portfolio. You need that diversity of clients to be able to offset flow and help improve risk management,”


demands and proposed new rules for clearing, among other regulatory changes, are likely to be influential in the months to come, says Mount. “Increased regulation puts more pressure on e-commerce providers to deliver a full service rather than just a product, so more focus on pre- and post-trade analytics rather than just price formation.”


Te likely response to upcoming regulations is still being worked out in many markets so, says Barker, it is important that any e-commerce platform is able to provide a combination of services that are both off- the-shelf and customisable in order to provide clients with a consistent response to market changes and a stable trading environment.


Niche led strategies


Some FX e-commerce service providers have a specialised focus, such as Nordic bank Nordea. According to Tomas Vinding, head of e-Markets at Nordea, the secret of success is to pick your niches and stick to them. “Tis will in the end be the differentiating factor for clients in choosing you as their preferred provider and also the areas where the investments you have made in your platform and services will pay off in the long term. Tis direction is very different from the one that the majority of


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