Many banks that took part in this year’s foreign exchange internet awards will no doubt groan with disappointment when they see that Citigroup has won the award for best bank in online forex for the second year running. And that is understandable. As standards rise across the board, the differences between one suite of online forex tools and another shrink.
Clients are becoming harder task masters the more internet-savvy they become. Not only do they expect certain levels of functionality, they are also beginning to lose patience with banks whose websites are poor on performance.
But many clients are still reluctant to commit themselves to end-to-end integration with one bank or portal. This is hindering implementation of straight-through processing but it does not mean that banks can reduce spending on their back-end systems. For example, as the drive towards streaming, dealable prices begins, so the need for a robust auto-pricing engine increases.
The request-for-quote trading systems that dominate today leave banks open to clients trying to play the market as the ticket price remains static. The slower a bank’s online response times, the greater the risk. Kevin Collins, head of forex trading at BGI London, says: “Taking advantage of non-negotiable prices is not really in the spirit of the game. We’re not in the habit of punishing banks for the sake of it. But in a year’s time, we might start punishing more if banks are not up to scratch on their prices.”
Unfortunately for those banks trailing just behind the winner, Citigroup still has the most comprehensive forex offering. Though the competition may have suites of impressive online tools, no other firm has the breadth of offering that Citigroup has on its platform, CitiFX Interactive.
Citigroup offers a wide choice of trading platforms, from the usual request-for-quote, non-negotiable execution, through to benchmark fixing using its own, independently audited rates. Being the biggest forex bank, Citigroup is in a position to be innovative in e-forex, and its joint crossing venture with Instinet, Instinet FX Cross, is an example . As it is such an unusual model, it may not get off the ground. If it does, it will be a first.
Citigroup lacks options trading functionality because, it says, there is little demand. But in options calculations, it has devised not only a calculator for pricing vanilla and exotic options, but also one unique for corporates.
Citigroup’s research is similar to other banks’, though it has a comprehensive flow tool, uncommon to many banks. Even some non-custodial banks could make better use of FX flows. Citigroup also posts a number of user manuals for various analytical, pricing and trading tools on CitiFX Interactive, something that other banks have begun to replicate. JPMorgan and Deutsche Bank, take this educational approach one step further, publishing product-based tutorials online too.
