Awards for Excellence 2005
Deutsche Bank
Deutsche has outstripped its rivals across the board – but watch out for HSBC
 |
| Jim Turley |
Deutsche Bank has had an outstanding year in foreign exchange. It was the clear winner of Euromoney’s 2005 FX poll, published in May, with a market share of 16.72%, outstripping UBS’s winning score of 12.36% in 2004. No other bank in the history of the poll has gained such a high market share. It set an impressive precedent for this fiercely competitive market, and one that will be hard to beat.
“If you want to be a big wholesale player in foreign exchange, you need the three ingredients,” says Jim Turley, global head of foreign exchange and commodities at Deutsche Bank. “The Holy Trinity comprises product delivery, risk management and processing capability.” Risk management is becoming an increasingly important factor for clients looking to execute large volumes of FX. Deutsche Bank started off by building its FX business from scratch and developing the risk management side. This investment style is now paying off.
“We can automate our risk management on our electronic services so that there’s no impediment to the scale we can go to,” says Turley. “Even if we put electronic delivery into two or even five times as many customers as we currently have, we believe we’ve got the risk management piece that can handle that.” This is a reassuring prospect for many customers and Deutsche Bank has even pumped resources into Shariah-compliant risk management. Not only does Deutsche Bank have a liability management solution available, but it also has an extensive range of fully Shariah-compliant FX asset class investment products available to its Islamic customers.
For the first time, Deutsche Bank gained the largest e-trading market share, 32.12%, in the poll. Electronic foreign exchange volumes more than doubled last year and Deutsche Bank has established itself as a market leader in this area, with its electronic client volumes up 400% year on year in electronic spot and 200% in forwards.
It has enhanced its bank-to-client AutobahnFX product as well as its bank-to-bank API offering this year. A new GUI has made its platform faster and more stable and it has increased its liquidity to enable clients to deal in larger sizes. This is an important development, which is why it continues to be by far the largest counterparty for hedge funds and banks.
It has secured its dominance once again among the very largest clients, remaining the number one counterparty in terms of volumes for clients with requirements over $25 billion and $100 billion. Its global reach is broad, making it number one in western Europe, north America, Asia and Australasia.
Research and advisory services remain important factors for FX clients when deciding to whom to award their FX business. Deutsche Bank has excelled itself in a number of areas, clinching first position for economic fundamentals, quantitative, options and volatility, and long-term research in Euromoney’s poll this year. It has also improved its prime brokerage services by providing a much wider product offering that includes commodities, OTC and equity services. Cross-margining and flexible client reporting are central to the service and it has also fully integrated into the FX select platform, enabling all clients to access the same data.
Product innovation is a crucial part of Deutsche Bank’s FX strategy. It has been a pioneer in the development of foreign exchange indices that provide clients with a convenient way to take a view on a currency’s strength or weakness. It continues to help clients access alpha in foreign exchange with over 40 active strategies and more than five systematic strategies, which can all be delivered in a range of formats. The bank also has a strong options capability for both vanillas and exotics.
Underpinning the bank’s entire FX business is its firm commitment to understanding the needs of all client types. It has specialist sales forces for all client segments as well as a structuring team across various different asset classes, centralizing the information that is then delivered to its specialist sales forces. “We want to be a full-service provider for all types of clients,” says Turley. “This requires understanding how they run their businesses and offering investment products ranging from cash through to structured products. You don’t sell clients what you have, you sell them what they want.”
HBSC is a rising star to watch out for. It too is making great strides in its foreign exchange business and was ranked fourth in Euromoney’s survey this year, after dragging its way up from twelfth in 2002. It was also voted as having the most impressive approach to business and its global footprint will no doubt propel the firm’s progress even faster.
