Day: April 19, 2018

Best Structured Products Platform

P&L Report Card

Structured products have become mainstream with the explosion in service providers offering second generation derivatives and other yield enhancing products. Most banks now offer a reasonable range of structured products and more and more are building out the ability to create your own basket. Mainly it has to be said, we are seeing this in the FX space – we are primarily a currency and derivatives magazine after all – but there are also some looking more closely at multi-asset structured notes.

Best FX Prime Brokerage

P&L Report Card

There are signs – and we should be whispering it – that the prime brokerage space is waking up again. Partly we suspect this could be because some prime-of-primes are revitalising the major providers (it could also be they are getting too good for the majors’ liking and the latter needs to spend more on keeping clients) and partly it is because they are done cutting the client tail and are now content to focus on better functionality for those remaining clients.

Best Research Platform

P&L Report Card

If there appears to be one area where MiFID II has been something of a fizzer it is research – or at least in FX terms it is. Few, if any, banks were concerned or had seen a huge impact on their output, generally speaking if required a client could be put behind a virtual paywall, or not permissioned for certain content. Others are happy to absorb the cost of research, meaning that for many clients not a lot has changed and for the banks, few have dramatically changed their business model.

Algo Provider of the Year

P&L Report Card

T his has become a very competitive field over the past couple of years and is showing little or no sign of slowing down, for just about every major FX bank has a suite of algo execution tools available for clients.

Achieving higher adoption rates remains something of a problem, however it is noticeable that the advent of third party mechanisms to analyse execution quality does appear to be giving clients some confidence in using algos – this is important if the impressive budget outlay is to be rewarded.

Best Order Management

P&L Report Card

Although the algo is taking on more importance in terms of order management, the relatively slow take up, allied to more short term bursts of volatility, means that customers are refocusing their attention on basic order management.

The trust issues that drove a wedge between some clients and the banking industry appear to be on the way to being, if not totally, solved, not least thanks to sometimes draconian oversight at the banks. Thus an old friend, the order, is making a comeback. Of course, if we were to be cynical we would say it is doing so because leaving an “at best” order neatly shifts the best execution emphasis back onto the bank!

2018 Post-Trade Award

P&L Report Card

Well we’ve mentioned MiFID II enough in this feature so it’s time to focus on the area that bore a lot of the reporting brunt, for post-trade is very much about the box ticking, the checks and balances that permeate the regulation.

We continue to see a drift towards a more utilitarian approach in post-trade – as we noted last year, the more focused the rules get, the less room for manoeuvre there is, therefore collaboration is probably the way forward.

Best Traders Platform

P&L Report Card

This award has historically been about information and interaction – providing traders with the right information in an easy to read format, preferably on the same desktop (or mobile device) as their pricing. Traders have always relied upon analytics because their decision making process has to be as informed as it can be if they are to succeed, especially in today’s 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. It equally means interactive execution tools, backed up by great analytics.

Best Leveraged Sector Platform

P&L Report Card

We have noted in these pages before how the hedge fund industry – with its myriad models – has been at the centre of the banks’ move to cut the client tail. For those funds that do not see FX as a source of direct Alpha – they still want to make money off their FX trading if they can of course – there has not been much difference. For those global macro players, who are having such a rollercoaster existence, however, the story, is different.

Best Real Money Platform

P&L Report Card

Thanks to everyone’s obsession with MiFID II, the asset manager space is another where we have not seen a tremendous amount of movement in the past 12 months. Yes, there is a greater focus on execution quality and more managers have discovered the words “market” and “impact”, but overall what we are seeing is the continuation of a trend that started in 2016.

Executions desks are under as much pressure, if not more, than their service providers, which means they are searching for the tools and services that can help them deliver those vital extra basis points in performance.

Best Banks Platform

P&L Report Card

This is becoming a very interesting area in the FX industry because it was noticeable this year that some banks who had previously been very keen on servicing their peers, were less so in 2018. We suspect this is one consequence of regional banks having to demonstrate a good degree of best execution for their own clients, meaning in turn that the value left on the table for the bigger bank is reduced. Lower margins equals less satisfaction on the part of the big bank, equals a growing reluctance to go the extra yard for the regional player.

The fact remains that even the smallest regional player probably has one or two quants crunching the numbers on the FX business, and this in turn leads to a more efficient process, but also smarter execution – again, to the cost of the top level LP.