NO BANK HAS won this award before. Until now, no bank has ever deserved to do so. Over the past three years, Euromoney has seen banks that are good at online fixed income, some that are first-rate at forex, some that are good at equity or derivatives and so on. Most banks have had some good sites and some mediocre ones. No individual 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 up those client sites with first-class back office and customer-relationship tools. It won more of the specialist internet awards than any other firm and came 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 that it already has. Details of the functionality of these sites are available in our awards articles on www.euromoney.com. 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 to add improvements continuously 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 closely contested awards in the competition – best site for equity research and best site for forex research.
UBS Warburg’s 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 service include Lehman Brothers, JPMorgan and Goldman Sachs, but such a comprehensive offering is far from the norm.
Internally, UBS Warburg staff can drill down further into this portal from the same front end to 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 its trading applications are faster than most, which means it 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 it has done so successfully. Although other banks claim that there is little demand for online execution in forex options, UBS Warburg is uncovering it, pushing about 20% of its volume through electronic platforms. That is more business in options than some other banks have been able to drum up electronically for spot forex. Competitors are now striving to replicate its success.
UBS Warburg’s 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 placed the bank 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 consecutive year. (Visit www.euromoney.com for full details on all awards.)
UBS Warburg itself uses the web well to track client behaviour and to set access levels. From one area of the portal, staff can find a client’s contact details, turn on or off that client’s access to a particular analytics tool or section of research and monitor the contact that the bank has had with that individual. Sales staff do this themselves, which helps to strengthen their relationships with clients. The bank can also track who has opened which document or page and when. But it protects that information carefully to avoid compliance problems and prevent breaches of confidentiality.
UBS Warburg’s customer service is strong, with 25 toll-free numbers offering 24-hour coverage from Zurich, Stanford and Tokyo. This e-help team can reset passwords, investigate failed trades and offer general guidance on using platforms. On top of that, there is a team tasked with continuously checking all the bank’s sites for errors.
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 heads of e-fixed income at many firms how their sites link into e-forex and they 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 – are unusually familiar with each other’s products.
Competition for the best bank on the internet title was close. UBS Warburg’s closest rival was JPMorgan, which won five awards and was runner-up in eight. In the early days of web development in wholesale finance, JPMorgan produced dozens of websites run by dozens of teams that all worked well individually but didn’t necessarily work well together.
Eventually, the bank worked out how expensive this was, and how confusing it was for clients, especially as they needed different passwords for each site. So it has united those 40 or so websites under MorganMarkets, which offers a highly respectable range of sites in all the main areas, and still beats the competition in terms of derivatives tools.
Deutsche Bank is another excellent firm in this area. It has a strong, coherent technology policy but does not win so many awards because its sites generally lack just one or two features that a rival’s site has. And these awards are so tightly contested that small differences may determine which bank wins. Deutsche’s convertible bonds website continues to beat the competition every year, and its money markets and deposits site is well ahead of it rivals. Its online forex services are developing quickly.
The envy of rivals In terms of connectivity, Deutsche’s Autobahn bond trading platform on Bloomberg is the envy of rival firms, and it claims to be the biggest dealer on multibank platform TradeWeb. Ian Rosen, head of e-commerce for global markets at Deutsche Bank, says: “We rolled out Autobahn on Bloomberg before web-based trading developed. So we could have convinced our clients to switch to the web for bond trading. But what would the benefit have been?”
That decision certainly hasn’t harmed the bank. But Rosen says that since then more clients have started raising concerns about the cost of Bloomberg, which is pushing Deutsche to focus more on new web technology.
The bank already has a web-based version of Autobahn that serves certain pockets of clients well. However, it is now seen by the bank not so much as a trading site as the base technology for other products such as swaps.
Like its closest rivals, UBS Warburg recognizes that different clients and different products need different sorts of technology for trading. Some of its 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 that is undertaking this kind of project – certainly Deutsche Bank is working along the same lines. Any firm that is attempting to implement it requires particularly robust pricing engines and excellent cross-product communication systems.
This project involves electronic transmission of live executable prices directly to UBS Warburg’s bank clients. Those banks can then distribute on those products to their own clients in turn. And, crucially, they can execute the trades themselves directly onto UBS Warburg’s trading engines. This guarantees best execution and means that they don’t need a team of traders to call around to get prices. That’s good news for a smaller bank’s bottom line, if not for every trader’s job prospects. UBS Warburg says this is suitable for all banks apart from its global competitors.
In a working example, a bank may have a dealing room with 10 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.
The initiative appears to be extremely well timed. Five years ago, spreads on products such as forex were sufficiently wide for smaller banks to make a profit out of them. Now that those markets have become more commoditized, it is becoming difficult for them to do so.
Several levels of integration are available. Some banks just link UBS Warburg’s web-based trading application into their own platforms so their traders use it and write tickets off it. Others take a direct plug-in, so they don’t even need to write trade tickets – the trades go directly into the bank client’s risk engines.
Progressive implementation Clients can take this service in a series of modules. They generally take one asset class at a time and gradually deepen the levels of integration into the back office. Several hundred firms now use the forex module, with securities execution being used by a little over 100. There is quite a lot of crossover in those client numbers. All in all, there are a few hundred banks involved, with more in the pipeline.
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 but mainly because various forms of securities regulation still 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 what is without doubt 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. (Well, that’s one way of putting it.) “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 bank 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.”
