NatWest Markets’ Jacintha Love, head of Agile Markets products, and Jeremy Maw, head of UK mid corporate FX sales, talk about the nuances of building e-FX solutions for corporate clients.
Profit & Loss: So why have corporate clients been a big focus for you on the e-FX side?
Jeremy Maw: Corporates are a huge part of the NatWest Markets franchise. We look after thousands of corporate clients, providing them with FX facilities to transact their FX requirements. There’s been a huge desire on the part of the bank in recent years to be a digital bank and ensure that our customers transact with us electronically, and, as a result, our Agile Markets platform has increasingly become the focus of our product and delivery for FX.
At the core of our ethos is making sure that our offering to corporates is safe, simple and efficient. What I mean by “safe” is being able to deliver FX products in a secure way, both in terms of making sure that the customer knows what they’re doing and how they’re executing transactions. In terms of keeping it “simple”, it’s about giving clients the ability to execute on Agile Markets in a very straightforward manner. And then it’s also got to be “efficient”, meaning that the speed of access, pricing, transaction and settlement must be excellent.
Jacintha Love: Exactly, in terms of safety we stress that Agile Markets is a truly round-the-clock service for corporates, and it uses the same underlying technology stack that we offer our largest global financial institutions – so it can withstand busy market periods or sudden events. We keep the platform simple by constantly getting client feedback, and because it is designed so that we can build apps on it for corporates that are tailored to their needs. So while there might be the same technology stack underneath everything, we don’t have a “one size fits all” model for online FX services.
On the efficiency side, we’re very aware that for our corporate client base FX might just be one part of their day job. So having everything on one platform and being able to quickly login, check the market, place a trade, check their trade history is important. For firms with more complex requirements, or who have more trading activity, we have recognised the need for new automation solutions, like multi-deal bulk uploads.
P&L: You mention that the platform isn’t a “one size fits all” solution – is there a vast disparity between the level of sophistication amongst your corporate clients when it comes to trading FX?
JM: When we talk to our corporate clients, they can range from small SMEs all the way up to large multinationals, each with different requirements. The way that a large multinational takes their pricing or interacts with us can be in a whole different format – they might want to use our algorithms or research, for example – whereas SMEs might just use the platform for a day-to-day rates blotter or to do their post-trade confirmations. So the requirements are very diverse, but through the apps that we offer we can facilitate the specific requirements of all these different customers.
P&L: You mentioned there about getting customer feedback regarding your e-FX platform. In your conversations with clients in recent years have you seen any significant changes or themes develop?
JL: Digital transformation has become a big theme. So when you’re talking to finance teams within institutions, both big and small, they’re looking at how they can reduce the manual effort involved in hedging and dealing. Some of these firms have unique challenges because they’ve got minimal technology resources to automate this process themselves, and, particularly where you’ve got customers that do a relatively small number of trades per month, the bespoke IT investment they need to make just doesn’t stack up.
Instead, they look to banking partners to enable them to do more with less and be leaner in their trading operations. Another theme is that these firms want closer integration between their trading platform and their existing systems of record. This could be Excel, it could be their accounting system, but they want straightforward service that they are able to easily hook into without having an IT specialist on their side. Right now, there are relatively few corporate clients with the internal tech resources to code directly to our APIs.
JM: Customers are now starting to look for value-added services. So it might be integration with their accounting packages, it could be analysing how their hedges performed, or portfolio analysis to simply understand their hedging versus their exposures. So there’s a demand for more analytics, too.
JL: One other trend that we’re seeing, and this is more amongst larger corporates where they have quite a lot of FX exposure, is that more firms are using algos to execute. For example, companies in sectors with high daily FX volumes are using algos to manage the impact of FX on their profitability. Therefore, much like a financial institution, the finance teams at these firms have to evidence best execution and show that there’s a strategy around how they transact their FX. That’s why in the past 18 months we’ve seen corporate pickup of the time slice or pegged time slice algo as part of their daily execution tools.
P&L: So are the algos being used generally more simple ones?
JL: It’s quite a big step for a corporate to start executing with an algo – it might involve a policy change, it might involve getting board approval. So at first, yes, you tend to see people pick up something like a time slice algo, something where you have some level of passive execution and then, once they’ve been using that for some time and have seen a pattern of execution and the TCA reports, they might come back and start to look at how else they could improve their execution.
P&L: Looking ahead then, what’s the key focus for you with corporate clients?
JL: We expect there to be more demand for integration, more demand for algo tools and anything that reduces the workload of this customer base.
JM: We spoke about the diversity of our customer base, so the focus is going to be responding to their different demands and adding new apps in response where it’s relevant for them. Other developments that we’re looking at are developing an options pricer on the platform that would generate, for example, term sheets, and key information documents that would help firms with compliance.
And this is actually a really good example of where we might have the technology capability already to offer this but in order to deliver it as a product that works for corporates – one that is safe, simple and efficient – we still need to put some investment and work in.