Month: March 2017

UBS, JP Morgan Carry off Top Honours in Digital FX Awards

For the second year in succession, UBS and JP Morgan have won the top two prizes in Profit & Loss’s Digital FX Awards.
For the fourth year in succession, UBS’s Neo won Best Platform, it was also named as Best Rates Platform and Best Structured Products Platform. Of note, UBS also won an unprecedented 10th Post Trade Award in a row.
Meanwhile JP Morgan reinforced its success from 2016 when it first won Best FX Platform by carrying off the award again in 2017. The bank also added three others to notch four trophies for the first time in the Digital FX Awards’ 15-year history.

“Eye on the Client”: The 2017 Profit & Loss Digital FX Awards

In broader society, the year 2016 was a dichotomy – it was a horror year in terms of global celebrities passing away, especially musicians, but it was a great year if you are a fan of sports teams like Leicester City or the Chicago Cubs.

Likewise, it could be easy to claim that 2016 was a horror year for e-FX in terms of product development and budget for anything other than compliance and regulation; however, there were pockets of optimism in the industry. It should also be noted that in terms of product delivery, the slowdown is natural and should have been expected – after all, if you already offer most products and services it is difficult to add to them.

Best Structured Products Platform

P&L Report Card: Structured products continues to represent a broad church – there is a focus on FX structured products here, but it should not be ignored that it is also about wider investment products and the ability to build a basket of investments.

Clearly any bank with a healthy private client franchise is going to score well here and indeed UBS’s structured products sit very well within Neo. Credit Suisse, likewise, continues to keep pace and users like its Index functionality, which two years ago added basket building capabilities, a la Barclays, to its suite of services.

Best FX Prime Brokerage

P&L Report Card: Did anything happen in the prime brokerage space last year? For the second year in a row, developments in this field were few and far between, which probably indicates the focus on making sure risk systems are fully up to scratch on the part of providers. It obviously started with SNB Day, but has continued with a few further market events, and as a result the major PBs have not only continued to cut some of the tail risk among their client bases, but they have increased their monitoring of existing clients as well.

Best Research Platform

P&L Report Card: The next 18 months are going to be interesting for the banks’ research teams, not only do they have a rather erratic geopolitical situation to deal with, but they are also firmly in the firing line over MiFID II. Post-January 1, 2018 will be the time when we learn a lot more about how important clients actually think research is, and while paying for research is only a small part of the regulation, it will have a large impact on this segment of the FX business.

We have noted previously that the more in-depth reports are lightly read – partly this is a question of time, and partly it is a question of the value of such reports.

Algo Provider of the Year

P&L Report Card: There is something of a paradox in how the algo execution space has become much more competitive in terms of providers, but the overall take up – while it ticked higher last year – remains subdued. There is so much emphasis on best execution, liquidity management and analytics – most of which falls to the algo execution teams to deliver – that one senses it is only a matter of time before demand surges. If it doesn’t, there is a lot of client facing technology to be accounted for, of course, but it should always be remembered that a lot of the client facing ideas that we see in the market have also driven upgrades in banks’ own ability to participate in FX markets.

2017 Post-Trade Award

P&L Report Card: Given the focus on regulatory compliance, probably the one area as busy – probably busier – than the technology development teams, is the back office. Post-trade is where the box ticking is done, the checks and balances exist here. We have noted in previous years how we view the end game in post-trade as being based very much around a utility model – the stricter the rules get, the less room there is for manoeuvre and innovation.

Best Traders’ Platform

P&L Report Card: This award remains about information and interaction. Traders need more information than ever before and they need it in an easy to read format, preferably on the same desktop (or mobile device) as their pricing. They also need excellent analytics, because their decision-making process has to be as informed as it can be if they are to succeed in what remain tricky, event-driven markets. This means a clean dealing tile – the origins of this award – remains important for GUI traders, and we would highlight that GUI traders typically offer better value to a provider bank than a fully automated client.

Best Leveraged Sector Platform

P&L Report Card: This remains a strange time for hedge funds, because the discarding process that we have witnessed for almost two years now seems to have accelerated. Part of the problem is a clash of cultures – the hedge fund manager has a direct obligation to its investors to make every dollar and cent count and this inevitably means there is less on the table for the banks. Throw in a key skill of the hedge fund manager – market timing – and you have even less enthusiasm on the part of the banks to embrace the sector to the degree they once did.

This is not to say the relationship is irrevocably broken however, rather that, as banks focus on the tail clients, hedge funds figure quite highly in that group.

Best Real Money Platform

P&L Report Card: I f there is one client segment that is in the eye of the storm when it comes to execution quality and market impact, it is real money. Execution desks are well aware of the challenges that currently exist in the FX market, however the same cannot be said for their oversight function – too many of which still seem to believe that top of book is good for 100 million. So the real money sector remains at the centre of the upheaval around best execution.

Putting aside this segment’s use of the WMR Benchmark Fix, this client set is possibly the most challenged of all segments due to its need to shift larger tickets into the market.