As the platform revolution sweeps through the foreign exchange markets, some banks have taken a contrarian view of the implications. Chris Knight, head of e-FX trading at Standard Chartered, says that while electronic execution has become a vital market cog, client relations remain paramount.
“When e-commerce came in people started hiding behind their machines and it became all about best price being hit,” he says. “The best price still gets hit but people are coming back to relationship banking.”
If banks focus solely on price, they miss out on understanding the wider picture of what the client needs, and the part that FX may play in other client- related activities.
“What is equally as important as price is building a long-term relationship. But from a client point of view it is not just about having numerous price makers and from the bank point of view there is much more you can do than simply provide execution. So more counterparties are not necessarily better.”
Standard Chartered has seen some clients rationalise their bank panels and use favoured bank platforms to cater to all of their needs, sometimes through partnerships if the bank does not retain a particular specialty in-house.
“If a client wants to invest in Asia, Africa or the Middle East we would want to own that and to be everything to that person, but we may reach out to partners for some aspects of other projects.”
One product for which Standard Chartered has seen increasing demand is its central treasury centre offering, a centralised solution through which a corporate can manage its FX exposure, probably based in its home market but servicing jurisdictions around the globe. The centralisation process creates efficiencies and saves costs, says Knight.
“Through technology they can literally tick a box and deal through their regional offices, and we have worked hard to help clients set these up, including different legal agreements covering each country.
“It makes sense to have a group of specialists in head office be able to log in, monitor and trade on behalf of their regional entities.”
The key driver for Standard Chartered’s increased focus on harmonised services is client convenience.
“If a client can see his cash flow that makes it easier for him to make decisions on FX,” Knight says. “People want that level of service, though of course they are still pretty price sensitive.”
In addition clients can trade more currency pairs by coming direct, Knight says.
“We have over 130 currencies electronically tradeable 24 hours; that kind of depth is unusual in the multi-dealer environment.”
Following a period of low volatility, business still remains tough and banks are looking for efficiencies wherever they can find them.
One area of focus for Standard Chartered in the recent period is proof of underlying reason to trade. Many Asia markets, for example, require that FX transactions must be directly tied to real-world sales or purchases, and the bank has worked with regulators and local authorities to service that need electronically.
“We have designed our system to be tailored to the environment in each country so that the client can easily pick an underlying reason for the trade, simply by clicking on an option. We have spent a lot of time on that. So it’s still very technology-focused, to cut costs and build scale and efficiencies.”