Leading interbank electronic broker EBS launched its first product on the Internet in January. EBS Trader is a direct bid to bring competition to the direct dealing market that has up until now been dominated by Reuters. Interestingly the release of EBS Trader comes at the same time as Reuters launches its own Internet-based direct dealing product. The two systems are unlikely to go head to head however. The Reuters offering is aimed at regional and smaller players, whilst EBS Trader (although still basically a simple product) has the sort of functionality likely to be in demand in the busier rooms.
The obvious advantage of launching on the Internet is cost. There is also the fact that Internet delivery extends EBS’ reach into areas that have traditionally been dominated by Reuters. As Peter Collins, global sales manager at EBS explains, whilst the system has the robust technology needed for implementation on bigger floors, in smaller, less active institutions it can be implemented on a single PC.
“We decided some time ago to bring competition to the direct dealing market,” says Collins, “But we waited for the Internet to develop adequately before launching. We needed adequate standards of security and stability before release; these are two areas that are crucial to our business as a whole.”
EBS Trader was developed in partnership with AVT Technologies, which built the EBS Ticker. It went live on 60 floors in January, with another 200 currently testing before going live, according to the company.
“VPN technology is new to many dealing floors, so this is something of a process of education,” explains Collins, “We are teaching clients about its benefits and how it can be used. We have been challenged by the Internet policy of some institutions in that they were not ready for the cutting edge technology we are using.”
Collins adds that 620 floors are currently committed to taking EBS Trader.
Talking and Dealing
There are two main areas on the product, the direct dealing and what Collins terms the ‘chat’ facility. The latter’s basic function is a one to one discussion; however, EBS have built upon this to provide broadcast functionality, as well as a forum.
The one to one and broadcast functionalities are very similar to those used on the Reuters system. Collins says that the ability to send documents, as well as drag and drop technology for broadcast, is planned for the next release, expected to be in late Q1/early Q2.
The forum is very much like an Internet chat room in style; however, EBS Trader provides a full audit trail. The forum is likely to prove very useful for larger institutions on an intra-room as well as inter-office capacity. Other users can be invited into conversations at any stage.
The contact book used on the system is extensive. By clicking on an institution’s dealing code, a secondary list of all users on that code appears, thus ensuring that the correct person can be contacted. As well as by name, this feature is also configurable by dealing book or desk. Collins says there are no limits on the size of contact book, or participants in a forum, although he adds if too many join a forum it becomes inefficient of course.
The direct dealing functionality will look very familiar to traders – always a good thing with new technology – a price is requested, made, and any deal executed transmitted directly to the user’s treasury management system (TMS). Collins says that EBS Trader (and EBS Ticker) connect to all the major TMSs. Other functionality involves a deal log and the ubiquitous interrupt button. An equally ubiquitous ‘Clear All’ button is also provided on the system.
Forwards and outrights can be quoted in broken dates and by round amount of the second currency, a holiday calendar is provided. To get around the problem of forwards being quoted in different fashions around the globe, EBS has decided to use the European convention.
“We have kept the functionality as simple as possible, using a Java applet via VPN tunnels and provided the highest levels of security and the highest specification. In the dealing environment you must provide stable, high-speed connections,” Collins explains.
The Big Question
Alas for those on the buy side that have long cast envious eyes at the EBS Ticker system, it will not be available as a function on EBS Trader.
The company says EBS Trader is a distribution platform for view-only (non-executable) EBS Ticker prices for qualifying EBS spot dealing clients only.
Banks can however, white label the EBS Trader product to enhance contact with their buy side clients. “Our customer base is the interbank market,” says Collins, “However we recognise the benefits of those customers being able to use our technology to communicate with their clients.”
Aside from this very tentative move towards the buy side of the FX market, EBS Trader may prove to be the first step of a widening product focus. Collins explains, “Direct dealing is likely to become less of an issue in the spot market than it once was – it has been in decline for a long while now. We expect direct dealing to become more of an issue for FX swaps and outrights, to the extent that ultimately we may see equal volumes of spot and forwards over the system. Looking ahead, we can also push EBS Trader into other product lines — and may investigate this – however, the FX business remains very much our focus.”
Currently it is not possible to parse from a conversation to the dealing platform. The ability to switch from conversation to dealing will be especially useful for banks using EBS Trader to interact with their clients. Many conversations on the system will be about the market, and involve recommendations or an exchange of ideas. Whilst it is not a great inconvenience to call separately for a dealing price, it would be easier for all concerned if a deal could be executed from a conversation.
EBS Trader should ultimately serve to push the EBS brand to a wider audience. Bigger banks will find the functionality useful, especially for dealing with ‘client banks’, but the real gain could be in those areas that EBS traditionally has not penetrated deeply.
The company is cognisant of this fact, hence its pricing policy, which it says is a flat fee of $200 per user.
EBS Trader also extends the company’s core competency, the facilitation of trading.
“At the end of the day, what really counts is implementation,” Collins says, “You can talk about what a system will do, but until it is a reality, and traders are using it, you cannot say you are achieving your goal – facilitating trading for a wider product range, and a wider client base.”