The move marks an extension of RBC’s electronic trading capabilities, which have been rebuilt in recent years under the stewardship of the bank’s global head of FX e-trading Stamos Fokianos, a veteran of Standard Chartered, RBS and Citi. “RBC Capital Markets is the first Canadian investment bank to act as a market marker on Digital Vega’s options platform, which will offer RBC’s clients greater access to the online FX options trading community,” the bank says.
The development follows the roll-out of Cockpit, RBC’s internal options and non-deliverable forwards pricing engine, which was built to be compliant with the post-regulatory trading environment of swap execution facilities (SEFs).
Fokianos told EuromoneyFXNews in an interview earlier this month that he believes options will become the next big flow business in FX, a move driven in part by demand from corporate treasurers.
These treasurers, according to Fokianos, will move from using relatively crude outright FX forwards towards using options for their hedging needs as the market becomes more transparent.
“The buy-side is pushing for this,” he said. “For a corporate treasurer who wants to enhance the yield of operations, if you understand options and the premiums are reasonable, you have a better chance of managing your money better.”
Trading of options on multi-dealer platforms (MDPs) is a relatively new development in the FX markets, and looks set to grow rapidly to meet new regulatory requirements – under the Dodd-Frank Act in the US, and EMIR in Europe – which require that options must be traded on multi-dealer trading venues and must be settled through a clearing house.
Digital Vega, the FX option MDP founded by Mark Suter, last month became the first FX derivatives trading venue to join Traiana’s Harmony CreditLink service, which provides real-time monitoring of counterparty trading limits and risk management.