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.
It is hard to know whether there is much room left for innovation in PB – as we noted with the post-trade services award, a more open, sharing approach seems to be gathering popularity in spaces where the rules are strictly applied – but if there is, it didn’t happen in 2017, which was another generally quiet year.
That is not to say the building blocks have not been put in place for some serious moves; we feel Deutsche Bank in particular could have a much larger say in coming years, we also note the desire of the custodial powerhouse that is Bank of New York Mellon to enter the PB space.
Of real interest to us, because it is taking a very different approach is that of Natwest Markets, which has leveraged the open source nature of Agile Markets to deliver a suite of PB services tailored and dedicated to different client types – often the ones the banks elsewhere have let go to the primeof-primes.
Winner – Citi
T he look and feel of Click, one of our alltime favourite technology solutions from the banking world, has not changed much over the past couple of years – as we noted earlier, “if it ain’t broke, don’t fix it”, but what continues to impress is Citi’s efforts to build efficiencies into the process and deliver clients tangible benefits into the bargain.
Citi is the biggest prime broker on the street (we would reiterate here that for these awards, size is irrelevant) which means it has to ensure it avoids capacity limits and bottlenecks and it does so by increasing capacity on a year-on-year basis. It also provides all the market-to-market and other KPIs that a prime brokerage client needs, as well as real-time positioning and option Greek monitoring. It does all of this in a rich visual environment (the data is there in tabular form for those that desire it).
Last year saw the bank develop enhanced compression for client forwards and swaps trades through better netting and novation, in a fully automated fashion. This not only enhances the efficiency in a business but also, crucially for the prime brokerage clients, delivers capital efficiency as well.
The novation capabilities have been extended to FX options, something that will help offer the same capital benefits to clients. Real-time APIs have been rolled out to support a dynamic rebalancer which solves the problem of needing to over-allocate capital to a particular trading venue. A generic Click API is also available that exposes the platform to client systems.
Being Citi, there are excellent graphics available from Click this year, whereby clients are able to view their credit concentration and correlations in an enhanced heatmap. Underpinning the platform is the ability for clients to tailor it to see what they want to see – clearly with this and Gateway Citi is preparing Velocity for a componentised age.
Click is one of the pioneers of today’s nirvana – an analytics driven business. The past couple of years has seen the bank settle the platform down in terms of look and feel, meaning it can focus, as it has, on delivering real client solutions that solve real clients problems. The regulatory environment has hit this part of the industry hardest, but in Click Citi has developed a platform to help clients navigate those stormy regulatory seas.