BNY Mellon is launching an FX prime brokerage service for its institutional clients.
The custodian bank announced in a release today that the new service will launch “in early 2018”.
In the release, BNY Mellon says the service will allow institutional clients to access a significant new source of FX liquidity while helping streamline and reduce operational expenses, including legal and onboarding costs, as well as generating substantial capital and netting gains.
Users of the service will be able to transact a suite of FX products while also having access to pre- and post-trade services in addition to BNY Mellon’s collateral, funding and liquidity capabilities.
The introduction of the new service comes at a time when some clients are experiencing challenges in sourcing liquidity or are facing increased funding costs in a constrained market.
“We’re launching a traditional prime brokerage service with a twist. By leveraging BNY Mellon’s leadership in collateral management, funding and liquidity, clients will benefit from a fully integrated and complete FX service,” says Jason Vitale, COO, FX & head of client execution services at BNY Mellon Markets in New York.
He adds: “FXPB is just one of a number of new services BNY Mellon Markets is introducing that will enable our clients to more efficiently access global currency markets.”
Michael Cooper, head of FXPB at BNY Mellon in London, comments: “BNY Mellon’s new service benefits from the combination of a highly rated counterparty with the capacity of a market-leading custodial bank. It opens up access to multiple new sources of liquidity for new and existing clients. FXPB is the ideal tool for those looking to balance the challenges of the uncleared margin regime with the need to deliver better execution on behalf of their clients.”
Profit & Loss has reported extensively on how new regulations have created a potential opportunity for FXPBs to service institutional clients that would not have previously needed to use them.
Traditionally, the main reason for using an FXPB was to get access to credit, but many of these real money and asset manager firms have plenty of credit already, and thus did not require this service. But as new margin requirements are making managing bilateral relationships more complex, and more FX business moves towards a centrally cleared model, some sources suggest that these institutional clients are looking at consolidating their FX businesses through PBs.
As part of the Profit & Loss Special Report on prime services in Q3 2017, it was noted that custodian banks, such as BNY Mellon, could be in a good position to benefit from this change, given their strong existing relationships with this client base.