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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.
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 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.