RBC Capital Markets is this month set to launch a single-dealer platform globally as part of its strategy to increase market share in foreign exchange.
The move is a significant step along the bank’s e-commerce roadmap. RBC began investing in the e-FX space about 18 months ago, says Stamos Fokianos, global head of FX eTrading, and in this time it has rebuilt its pricing engine and has improved its risk management capabilities.
RBC already has a single-dealer platform for its Canadian clients, FX Direct, which it launched in 1998 – one of the first banks to embrace the e-channel. But a focus for the bank now is to look beyond its home market to Europe and Asia to expand its e-FX offering, client base and support network and to increase currency coverage, Fokianos says.
“While we will continue to dominate the Canadian market – and it’s a priority for us to maintain our market share there – a big opportunity for us is to expand our electronic capability and the geography where our clients are located. This is part of our strategy to be in the top 10 FX banks by the end of 2012,” he says.
To that end, the bank will this month launch RBC DX, offering banks, corporates, hedge funds and real money clients globally a platform with a range of execution mechanisms including orders, executable streaming and request for stream for spot, forwards and swaps in G10 and emerging market currencies. RBC DX covers the complete FX trade lifecycle, from research to trade settlement. In a later iteration RBC will allow customers to execute through its research.
RBC also launched a new order book in August using FXall’s Customer Order Management System (Coms). “This can integrate into our algorithms so we are able to see where the volumes are and where the expected inventory is going to be rather than the inventory we have now. It also gives us the ability to accept and process a much larger volume of orders than we had before – about 10,000 with this system,” says Fokianos.
Fokianos and his team are also building a new pricing engine for FX options and NDFs, which initially will be distributed internally. Early next year RBC plans to connect to multibank options platforms that are currently hitting the market, including those from SuperDerivatives and FXCM, Digital Vega and Tradeweb.
“Connecting to the multibank platforms is the first step and then when regulations become clearer we will work to include options trading on our single-dealer platform,” says Fokianos.
The launch of a single-dealer platform complements RBC’s move to act as a market maker through a number of vendor platforms including 360T, Bloomberg, Currenex and FXall to expand its global reach.
These platforms often ease trade with customers in parts of the world where a limited Internet infrastructure can cause single-dealer platforms to suffer from latency issues and less effective market making.
In June, RBC announced that it was the first Canadian bank to act as a market maker through the Reuters Trading for Foreign Exchange (RTFX) platform. The bank is particularly targeting Asia with this move to win new business from bank clients.
“RTFX and Bloomberg are well established platforms within the bank community, particularly regional banks who focus on the middle market of their domestic FX customers,” says Fokianos.
“Customers can leave overnight orders which we can execute, and then whatever remains they can do themselves the next day. These banks are not 24-hour businesses, they are local banks and are the target market for RTFX. By market making through RTFX we can get a substantial amount of flow, which provides us with more visibility in the markets.”
Building up its bank client franchise business is starting to pay off. According to this year’s Euromoney FX survey RBC registered the second largest market share improvement for bank clients, increasing its share by 121% as it rose 14 places to 19th position.
For the remainder of the year, Fokianos says he will focus on the RBC DX launch and will continue with risk management, algorithm, auto-hedging and auto-skewing work, as well as enhancing the bank’s pricing capabilities, particularly in swaps.
“The most important thing in terms of flow acquisition will be expanding the one-click streaming offering to all the platforms that we market make on,” Fokianos says.