No bank has won this award before. Frankly, no bank has ever deserved it. Over the past three years, Euromoney has seen banks that are good at online fixed income, some that are good at forex, others that are good at equity or derivatives and so on. Most banks had some good sites and some mediocre ones. No firm has been able to boast of high-quality offerings in all areas.
Until now, that is. UBS Warburg is the first winner of this title because it offers excellent tools to help clients do their jobs across the board, and it backs those client sites up with a first-class back office and customer-relationship tools. It won more internet awards than any other firm and was runner-up by a small margin in several other key areas. That consistent high quality is a particular achievement given the extremely good overall performance of online offerings from all the top banks, especially JPMorgan and Deutsche Bank.
Rather than spending the past 12 months building new sites, UBS Warburg has focused on improving the quality and response times of those it already has. Details of the functionality of these sites are available in our awards articles. But, for example, CreditDelta, the firm’s fixed-income portfolio analysis tool, is still by far the most advanced of its kind. It is run by extraordinarily committed staff who use their close relationship with clients continuously to add improvements to the platform. Issuer Desktop Analytics, which shows borrowers in real time how their bonds are trading, is being used well as part of the bank’s origination and new-issue process. And the bank won two of the most competitive awards – best site for equity research and best site for forex research.
The fixed-income portal is meticulously organized and offers a depth of information that only the top firms can rival. It is split up into market segments to reflect the specializations of its clients, so it bunches, for example, all sterling corporate borrowers into one area.
Users can open screens that show how a particular bond is trading, use links to send messages from the platform, open credit research documents or financials information, plot relative value graphs… the list goes on. In short, the site puts everything that a client needs to know about a particular credit in one place, so there is no need to open other sites, or even other sections of the same site.
The firms that can rival this offering include Lehman Brothers, JPMorgan and Goldman Sachs, but it is far from the norm.
Internally, UBS Warburg staff can drill down further into this portal from the same front end and find out which investors have bought a particular credit, when and how. The whole package is simple and intuitive to use. Very few firms can combine market data, research and analytics in this way, and no other firm demonstrated this level of internal use of the web during the site reviews for these awards.
Crucially, the bank is seeing real benefits from developments such as these – especially in electronic distribution. Over 55% of forex volume is transacted electronically. For some client groups, such as banks, that figure rises to 75%. It is no coincidence that UBS Warburg has risen in the rankings for Euromoney’s forex poll simultaneously with the development of its trading technology. Response times for the bank’s trading applications are faster than most, which means that the firm has less need to rely on leased-line connectivity.
Also in forex, UBS Warburg is one of the few firms to make a push into online options, and successfully so. Although other banks say there is little demand for online execution in forex options, UBS Warburg is uncovering it, pushing around 20% of its volume through electronic platforms. That is more than some other banks do electronically for spot forex. Competitors are now striving to replicate that success.
The newly relaunched equities portal demonstrates impressive attention to detail. It is the result of painstaking efforts to improve navigability and ease of use. And in common with several other of the bank’s sites, it offers educational services. This development made UBS Warburg a close second in a range of equities categories. It was beaten only by Morgan Stanley, which retains the best bank in online equities crown for the third year in a row.
The people who run the electronic strategy for the different business areas at UBS Warburg are generally far more aware of what their colleagues are doing than at other banks. Ask the head of e-fixed income at many firms how his sites link into e-forex and he will generally shuffle nervously in his seat and say: “Er, you’d have to ask them.” At UBS Warburg, by contrast, the three heads of electronic initiatives in London – Stuart Clenaghan in fixed income, Ed Hulina in forex and Jerry Brimeyer in equities – know each other’s products unusually well. Like its closest rivals, UBS Warburg recognizes that different clients and different products need different sorts of technology for trading. Some clients are happy with multibank platforms, some with the firm’s single-dealer online offerings. Others don’t like the internet, so they use virtual private networks or Bloomberg.
Now the firm’s latest innovation in technology is drawing on the strength of that trading infrastructure with its “Bank for banks” initiative. UBS Warburg is not the only firm undertaking this kind of project – certainly Deutsche Bank is working along the same lines. Any firm that is attempting such an initiative needs particularly robust pricing engines and excellent cross-product communication.
Broadly, this project involves electronic transmission of live executable prices directly to UBS Warburg’s bank clients. They can then distribute those products to their own clients. And, crucially, they can execute the trades themselves directly onto UBS Warburg’s trading engines. This guarantees best execution and means they don’t need a team of traders to call around to get prices. This is good news for a smaller bank’s bottom line, if not for every trader’s job prospects. UBS Warburg says its system is suitable for all banks apart from its global competitors.
In a working example, a bank may have a dealing room with ten sales people and five traders. Those five traders are not sufficient to provide their clients with a 24-hour service. So UBS Warburg can pump through its liquidity from teams that can produce it aggressively and constantly. In return, the bank client then trades directly through UBS Warburg.
A well-timed initiative The initiative appears to be well timed. Five years ago, spreads on products such as forex were sufficiently wide for smaller banks to make a profit from them. Now that those markets have become more commoditized, it is becoming difficult. Add that to the technology that makes it efficient for both sides to do the transactions and processing, and it makes sense as a project, especially as UBS Warburg does not have the kind of branch network that could easily leave it competing with itself in smaller markets.
KeyTrader is a form of the fixed-income module, and it links a bank’s trade order management straight to UBS Warburg’s execution tools. Development in fixed income has been slower than in other areas, partly because the spreads are still there for smaller firms to make money out of it but mainly because various forms of securities regulation exist around Europe. Nevertheless, KeyTrader has become popular, particularly among Swiss private banks. And UBS Warburg does not act merely as a technology provider. For example, in Switzerland, bond transactions up to a certain volume limit are executed automatically. When they break through that limit, UBS Warburg works the order for the client.
In forex, UBS Warburg will be making a big push for new clients next year. Seth Cohen, head of client relationships for banks at UBS Warburg, says: “With the investments that we made as a group in infrastructure, processing and support, it makes sense for us to rent out extra capacity. We then offer that on to client banks in the form of liquidity in forex, equities and to a degree in fixed income.” It can also be used for derivatives, trade finance, private banking and even structured products. Most clients that use this service take one piece of that offering – few are fully integrated with the full range.
Cohen says: “Just about every board meeting at banks these days is dominated by the need to increase efficiency and cut costs. If you ask a CEO or CFO about this, they will typically appreciate the concept because it allows them to achieve greater customer satisfaction with reduced costs.”
Cynics would suggest that this initiative is just a clever way for UBS Warburg to try to squeeze profits out of over-investment in excellent trading infrastructure. Has it bought technology that is too powerful for its own needs? Unsurprisingly, the firm denies this. Claudius Sutter, managing director at UBS Warburg in Zurich, says: “We are very careful with our capital from shareholders. This initiative is wonderful – it has been a diligent decision.” And the bank hopes it will develop quickly over the next year. “Looking at the markets, they are not going to be tremendously positive over the next couple of months at least,” says Sutter. “But this is helping this initiative out quite a bit. We have to do very little marketing to explain why it is time for banks to change their business model.”
Given that, UBS Warburg is likely to face a lot of competition from other global firms with a similar strategy. But it is better placed to face that competition than most. When a firm demonstrates or talks about its technology, this reveals a lot about its culture and organization. Whether through luck or management, the firm seems to have found ways around the silo structure, and this shows even when just talking to the people at the bank who handle technology. Sutter says: “If you don’t have a culture of living with an integrated model, you will not be able to pull off an initiative such as Bank for banks. Often one business line has to step back to allow another to benefit, and incentive structures do not usually allow that. We can make it happen.”
