Commerzbank revitalizes SDP with interactive structured products platform
Commerzbank has unveiled Commander, its enhanced single-dealer platform (SDP), which features what it claims to be the world’s first interactive structured product portal.
Based on the bank’s Click&Trade platform, the rebranded product will be rolled out to clients after the Dubai ACI meeting, on March 26. The most notable innovation, which the bank believes will differentiate Commander from its rivals, is the introduction of Kristall, a new FX structuring platform.
“Kristall is the first product of its kind,” says Enrico Ferrante, global head of FX structuring at Commerzbank Corporates &Markets. “If there is anything similar in the market, I am not aware of it.
“This is something of a revolution. We wanted to make structured products more transparent.”
The bank plans to make its proprietary structured product system available to clients over its portal, allowing them to communicate in real time with Commerzbank’s product specialists in London, Frankfurt and Singapore, and share files with colleagues.
Commerzbank hopes this will help to demystify structured products, allowing clients to understand the process behind the deals, from pricing, to execution and confirmation.
In this way, Commerzbank bank believes clients, through collaboration with its specialists, will be better able to understand the risks surrounding the products and be able to sell them on.
“Service is at least as important as price on these kind of products because they cannot be just traded and forgotten,” says Ferrante.
“We are trying to differentiate ourselves by giving clients a service that allows them to handle these products from inception to the very end, including reporting and documentation.”
He says that while many recognize the benefits of pooling liquidity to better service their clients, few recognize the importance of pooling knowledge.
Ferrante adds that the system, which the bank claims has been successfully beta tested, will greatly reduce the cost for clients of establishing or expanding their own structured products business. Indeed, he says if clients tried to build systems to price and execute structured products from scratch, it would cost “several million euros” before they wrote the first ticket.
He says it is a win-win for the bank if its clients were successful in creating thriving structured product businesses using the portal.
“For us, it’s an opportunity to expand our business without competing with other local market players,” says Ferrante. “For clients, it’s an opportunity to establish or expand their structured products business without incurring massive cost.”
Commander has a range of other new features, including streamed NDF and gold prices.
Paul Scott, global head of eFX at Commerzbank, says the ability to offer those products is a prerequisite to compete with the big four or five SDPs of other large banks, and will also help differentiate Commander from the portals of other smaller banks, which do not offer that capability.
“If you have a single-dealer platform that offers G10 as well as precious metals and streaming NDFs, it holds you in very good stead, especially when you are trying to compete with the electronic communication networks (ECN) and multi-dealer portals,” he says.
The platform also includes access to the bank’s research, a position blotter and real-time charting tools, which the bank believes will prove popular with emerging-market bank clients that do not necessarily have access to comprehensive market information.
Stefan Hamberger, head of eFIC sales at Commerzbank, says while most people’s perception of Commerzbank is that it is the biggest German corporate bank, most overlook that it is also a relationship bank to roughly 5,000 banks worldwide due to Germany’s trade links.
Indeed, banks made up 63.6% of Commerzbank’s FX volumes, according to last year’s Euromoney FX poll, well above the market average of 38.17%.
Hamberger says Commerzbank has relationships with banks from Taiwan to South America on the back of these trade flows, and has revamped its SDP partly with those emerging-market clients in mind.
“That is a strong institutional client base for us, where we already have our systems in place and where we are going to distribute our platform even more,” he says.
Scott says the bank has also undertaken a fair amount of work that will not immediately be visible on its graphical user interface (GUI).
The bank has co-located in London, Tokyo and New York, as well as with leading ECNs globally. It says it has also updated all its network and infrastructure links, including its Tokyo-London and New York-London links.
Scott says the bank’s SDP already had a well-established track record of stability in its infrastructure, staying open during the 2010 flash crash and last year’s Japanese tsunami, but Commerzbank did not sit on its laurels.
“The influence of the high-frequency hedge fund community is making all the banks invest quite a bit of resource into their infrastructure and that’s what we’ve done,” he says.
“Unfortunately, all that time and effort is not instantly visible over the GUI, however they see it in terms of stability of price and our ability to risk-manage flow.”
Commerzbank intends to add to the functions available on the platform. It plans to start streaming option prices, bring out enhanced execution algorithms, and roll out CNH and other precious metals over Commander in the coming months.