The new system, which will complement Wells Fargo’s existing single dealer platform (SDP) Foreign Exchange Online, will operate as a price-generating engine, accessing liquidity directly and indirectly from more than 50 sources – including market-making banks, a variety of multi-dealer platforms (MDP), global FX trading houses – and also from Wells Fargo’s FX desk, which will input its own prices into the system. Wells Fargo head of FX e-commerce Steve Godfrey says the bank chose to outsource the development of the new pricing engine to Integral, rather than build it in-house, because the Integral system has “out of the box” features that provide streamlined electronic connectivity to MDPs, such as FXall, 360T and Bloomberg.
“The way to think about the services that Integral is providing to Wells Fargo is that they are providing a couple of key components that are necessary for us to support our clients when they deal on specific channels,” says Godfrey.
However, Wells Fargo’s in-house FX team will maintain control over the prices produced for customers through the Integral system by inserting a proprietary algorithm into the engine that allows the bank to ensure the prices the machine produces are ideal for the bank’s clients, says Godfrey.
“We have an FX trading desk, and they manage positions for Wells Fargo by interacting or transacting with people in the interbank market,” says Godfrey. “The trading model with the Integral system is essentially the same except that it is all happening electronically as opposed to over the phone or through a chat system.”
Once the Integral system receives a request from a customer for a Wells Fargo FX price through the customer’s connection to an MDP, it then flashes that price back to the customer’s MDP, adding the bank’s name to the long list of price providers willing to deal with the customer, says Godfrey.
“The Wells Fargo price produced through the Integral system and presented to the customer isn’t just an average or the best price,” says Godfrey. “We will use the Integral system to incorporate all the information we have about the price request, and then we feed in some of our own information that comes directly from our trading desks, and that is all part of the input that produces a final price.”
Reaching out to new client segments
Wells Fargo hopes that, with its new engine and existing SDP operating side-by-side, it can use the Integral system to reach out to new FX clients in the US and internationally who want to deal currencies in a purely electronic environment.
“Electronic FX is not new to Wells Fargo, but Integral is helping us expand that footprint to serve a wider range of clients across more channels than we’ve had previously,” says Godfrey.
As such, Wells Fargo is hoping the Integral system will help the bank expand its FX client base in the large corporates and financial institutions segments in North America and globally, he says.
“The typical user of our Integral product would be an active trader in the market probably more interested in leaving orders, they’re constantly monitoring the market, they may be in and out quite a bit during the day, and that’s a different trading pattern for someone you would see for Foreign Exchange Online,” says Godfrey.
Meanwhile, Wells Fargo will continue to invest in Foreign Exchange Online and is set to launch a new version of the SDP soon in a bid to improve its existing over-the-counter price offerings, says Godfrey.
“Foreign Exchange Online will still be our flagship product, and the majority of our FX transactions coming through will be through that channel,” he says. “But we recognize it may not work for some clients, so we wanted to offer additional services through the Integral system.”