Svante Hedin, global head of electronic markets at SEB Merchant Bank, explains to Galen Stops, deputy editor of Profit & Loss, how technology is changing the role of the regional banks.
Hedin says that the evolution of the regional or super-regional banks is being driven by a number of factors, one of which is technology.
“It’s an enabler for some of the banks that at some point were dominant players in their particular currencies and then as the years have gone past they have perhaps under-invested and not quite kept up with the overall progress of technology and effectively get swallowed up by some of the larger guys,” he says.
Dan Torrey, global head of FX e-commerce sales at Northern Trust, explains how technology can help revolutionise regional banks’ e-FX businesses.
Torrey concedes that, prior to joining Northern Trust, he had been uncertain about whether or not claims that the increasing availability of technology is helping to democratise the FX markets were accurate.
However, he says that his own experience in building out Northern Trust’s e-commerce business has convinced him that these claims are not overblown.
“What’s happened is that through the technology, being able to bring in house better e-commerce pricing, being able to reduce a lot of latency, being able to expand the pairs in which we’re competitive and then to provide that downstream to our customers, means that we’re not just another custodial bank offering to them, we can actually competitively go after third-party accounts where we couldn’t’ get them before,” says Torrey.
Currenex is shifting the focus of its white label business to increasingly target regional and mid-tier banks, citing a number of broader industry-wide trends for this change.
Traditionally, Currenex has focused on selling its institutional grade technology infrastructure to brokerage firms, which then re-brand it in order to provide FX trading services to their own customers.
The most recent example of this is the institutional platform launched by the retail broker Oanda at the start of May, which will utilise a branded version of Currenex’s HTML trading front-end.
Cboe FX announces today that UBS is acting as a Central Credit Intermediary (CCI) for certain counterparties wanting to access its platform, with an eye to bringing on more liquidity from regional banks.
Under the new arrangement, regional banks or other financial institutions that might have limited bilateral credit can leverage UBS as a spot FX intermediary to alleviate this hurdle, settling all trades exclusively with UBS. The potential benefit of this for these institutions, according to the exchange, is that they will gain exposure to a greater number of Cboe FX participants despite the absence of direct credit relationships.