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EBS: An Expanded Franchise

Despite a general uptick in trading volumes in 2018, G3 volumes were – from a historical perspective – relatively subdued. Once upon a time this would have spelled bad news for EBS, but it is a testament to how the business has evolved in recent years that its spot FX volumes were instead actually up 9.5% year-on-year.

“It’s been a big story around emerging market currencies and last year we observed a big increase in volumes in Asian currencies in particular,” says Seth Johnson, CEO of cash markets at CME Group, which owns EBS. “Fortunately for us, that’s a pretty good part of our franchise now. Most of our growth in the last three years has been driven out of Asia, and offshore renminbi is now our third largest currency by volume.”

Last year also saw EBS finish rolling out a few big initiatives that were designed not only to help grow its EBS Direct franchise, but also to align with market trends around data and transparency. For example, it introduced a new aggregation logic that ensures that when a client executes above a certain size that it is done as a single ticket.

“Liquidity providers have been able to improve their spread retention and the market impact of the deal that they’ve done with their clients has been significantly diminished as a result. And on the flip side, the liquidity consumers are getting tighter pricing from these liquidity providers,” says Johnson.

In parallel, last year EBS continued to develop the analytics suite that it launched in the second half of 2017 that provides users of the platform with a wide range of data regarding their trading activity. The firm also rolled out its market data product, Live Ultra, for NDF products, enabling clients that are trying to automate their pricing to have access to better data. These changes, says Johnson, are aimed at providing the most sustainable ecosystem possible going forward.

Discussing the areas where EBS will look to continue improving its offering in 2019, Johnson says: “You can be competitive based on a variety of factors. One of them is technology, but although we are going to be upgrading the technology on both our Direct and Market platforms, there are ultimately limits to the benefits that clients will gain from technology enhancements. I think that it’s going to be more important to give our clients the tools with which to manage their business more effectively.”

In this area, one planned improvement to the Quant Analytics platform currently offered by EBS is to start providing all the data on the platform in real-time. One significant benefit of this that Johnson touts is that it will enable liquidity providers on the API to consume data regarding the behaviour of their liquidity consumers in real-time and therefore automatically manage their pricing tiers and spreads in a much more effective and efficient manner.

“I think that is going to be a huge benefit to liquidity providers, and ultimately it will enable them to more accurately price their liquidity consumers and give them the liquidity that they expect,” he says. In terms of the aforementioned technology upgrades, EBS plans to deliver its next generation workspace in 2019. Conscious of the fact that there has been little clamour in the market to change the current EBS workstation, Johnson says that there are no plans to significantly change the user experience. However, the workstation is very much built on top of legacy technology, which makes it challenging for EBS to add new functionality to it, which is why the upgrade has been deemed necessary.

Elsewhere, EBS plans to roll two customer front ends, its Global Access Web delivered platform and Yuniti, into one, and will be improving the architecture of EBS Direct to make it faster and much more scalable, a move that Johnson says will enable the firm to compete much more effectively in the API space.

On the technology front, one ongoing piece of work for EBS this year will be the continued integration with the CME Group, which acquired the platform as part of its deal to buy NEX Group which officially closed in November. Perhaps unsurprisingly, Johnson is publicly a little vague still on what this integration will ultimately look like.

“No decisions have been made yet, but we have a pretty good idea of what direction it’s going down and we’re confident that it will give our clients a significantly simpler, more deterministic platform that is cheaper for them to interact with from an operational cost perspective,” he says.

A final area of focus for 2019 that Johnson is keen to highlight is the EBS Institutional business. He concedes that the sales cycle amongst the buy side community for this platform can be lengthy due to the more bespoke nature of their requirements, but adds that everything is now in place for this to be a big year.

“We truly believe that this is going to be a breakout year on our EBS Institutional platform, we have got everything we need lined up for 2019 and we think this is the year that it will start to have a big impact in that space,” he says.

Galen Stops

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