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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 Corporate Platform P&L Report Card It’s all very well focusing on the large corporates who we all know, but this space is so much more diverse than that – and in terms of value, many bankers will tell you in an unguarded moment, that the real value lies further down the food chain. Most multi-nationals have very sophisticated technology and often execution desks, but when you go further down the chain more often than not the FX hedging is handled as part of its daily tasks by the accounting function and people with only a passing knowledge of the infrastructure and nuances of the market.
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.
2018 Super Regional Award P&L Report Card If there is one area with plenty of room for growth in the single dealer space we believe it is in the regional or superregional segment. This is always a sensitive subject, as regards who we consider to be in this bracket, but once again we have decided to look at banks not widely recognised as being in the top seven or eight banks in e-FX, but that does have some really good regional strengths. Rather than look at what is a very broad church, we have tapped into our regional networks for feedback on the various players and gone from there – previous observations are also included. Looking ahead, we may decide to more closely define this category and subject the banks therein to the same scrutiny we do the top tier – something for them to look forward to!
Best Emerging Markets P&L Report Card As data has continued to improve in emerging markets so too has the level of competition risen amongst the banks for what remains, still, high value business. This data has been driven to a small degree by more dealing (or pricing) on public platforms, but generally speaking, given fears of market impact (and given how concerned clients are about it in G10 they must be traumatised when it comes to EM!) emerging markets remains a single dealer, or small aggregation, game. The aforementioned improvement in data has meant better analytics, and it is noticeable that those banks offering good analytics packages have extended their offering in emerging markets – clearly this is an area of differentiation.
2018 Product of the Year P&L Report Card Contenders are thinner on the ground this year, thanks mainly to “that regulation” stealing the limelight and the development dollars, however there are one or two areas that have seen progress. The first, as we hinted at earlier, was in the control space – given the client not only control over their execution, but also helping them to run their business. Citi’s Command Centre is an excellent product, as we have already noted, and the last year saw several players roll out their own version, although, inevitably, they are not as sophisticated and advanced at this early stage as the pioneer they are all trying to chase.
Best Commodities Platform P&L Report Card For many years this award was something of a foregone conclusion. While the many banks offered various products around precious metals, JP Morgan and Goldman Sachs stood out by having significantly stronger and broader commodity suites, with the latter traditionally winning this award. In 2016 this dynamic began to change. The gap between these two banks started to close, not because Goldman Sachs has stood still, but rather because JP Morgan clearly put a lot of effort into improving its commodities offering, adding an impressive range of new products and functionality.
Best Rates Platform P&L Report Card Like the boring guy at a party, we at Profit & Loss have been waiting for this award to disappear, but just as the boring guy occasionally says something funny, every year we talk about cutting the category, only to be shown enough functionality to keep it in! That should not be construed as meaning there is a lot out there, fixed income and credit on single dealer platforms remains a fairly closed shop, delivered either via a futures offering or, in the case of some of the bigger players, with a long list of Rates products for trading on a principal basis.
Best Mobile Platform P&L Report Card For the second year in a row we are able to celebrate more clients coming around to the benefits of mobile trading – and for the second year in a row we cannot point to any new apps on the market! The obvious cause of this lack of discernible movement is likely to be the ubiquitous MiFID II, which, as we have already stated, dominated thinking and budgets last year. Another factor may be – and we find this amazing in 2018 – some lingering doubts over the technology’s suitability and the control framework around it.