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The Dealing Room of Tomorrow: are you ready?

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Greg Pierce, Head of Global Markets in the US, and Hossein Zaimi, Head of Trading, Asia Pacific, HSBC.


The future is already here,’ wrote William Gibson, the futurist, back in 1993. ‘It is just unevenly distributed.’ Global market players know what he meant. The forces that are shaping the markets of today – rising capital and collateral requirements, volatility, low yields, and digitalization – require service from a constantly innovating dealing room, specifically set up to meet these unevenly distributed forces. HSBC has built the Dealing Room of Tomorrow programme – a combination of forward-looking insights and forward-thinking solutions – to help clients address the pressures that these forces are exerting today. 

Greg Pierce, head of global markets in the US, and Hossein Zaimi, head of trading, Asia Pacific at HSBC, explain how the bank is shaping the dealing room of tomorrow in these two strategic regions for the bank and how it supports their clients and their various needs.

A new future for financial markets

Greg Pierce, Head of
Global Markets, US

The future of financial markets has changed. Globalization has opened new horizons, while changing market conditions such as low yields or volatility have brought unprecedented opportunities as well as uncertainties. Regulatory requirements have created a new framework and, every day, new technologies are transforming the world of trading.

These trends shaping today’s markets are blurring the old distinctions – between buy side and sell side, between large and small and across regions. What potential challenges and opportunities can investors expect? New regulations keep cascading down, while new fintech products emerge ready to disrupt the established way of doing things. For many banks this pace of change is a fundamental challenge. HSBC sees it as an opportunity.

“What we are doing is bringing a sense of certainty for clients who are operating in a period of extreme uncertainty,” says Pierce. New breeds of financial technology are using big data science and digitalization, which create unprecedented scope for serving clients better. HSBC is using these new forces to forge cutting-edge risk analytics, which allow the bank to best serve its clients’ needs. For instance, the bank can now track clients’ FX and treasury exposures in real time, allowing it to focus on finding the right hedging or funding solutions for its clients. 

“In this fast-paced environment, it is actually equally important for us that our clients are prepared but also able to decipher where the opportunities are. That’s why, we have put a strong emphasis on supporting them on key topics such as renminbi internationalization for instance,” explains Zaimi. “In these changing times, leveraging our expertise to share it with our clients is making a difference for them and, in turn, allows us to serve them better too.”

Complexity is yesterday’s problem

“Technology has allowed us to take complexity out of the trading process where possible,” explains Pierce, “this allows us to concentrate on our client relationships, on new market opportunities, products and trends, and less on the complexities of execution”. 

For instance, when a client in the US wants access to the increasingly important Dim Sum bond market to match its Chinese liabilities and revenues, HSBC can offer access to deep pools of liquidity from its privileged market position in the region. It also has the backbone to create the market analytics and insights that can help ensure best execution, as well as the data to ensure that these trades meet whatever global regulatory requirements are necessary. “This enables us to put more time and resources into providing clients with an enhanced service.”

The sheer range of client types that HSBC serves is the elemental core of the bank’s dealing room. In the US for instance, the bank serves multinational companies and institutional investors from its US headquarter in Manhattan. In Asia, it serves this client group, as well as private banking, commercial banking and retail banking clients. 

“Our US client base are mainly from the institutional side and mainly based in New York City,” says Pierce. “Therefore, we place a very high premium on delivering a quality product to demanding clients.”

In Asia Pacific, the more diverse set of clients presents the challenge of building a system that serves retail clients in the region as well as those institutional clients across the globe. HSBC is meeting this challenge by taking all the complexity in-house and making its products as simple as possible for the clients. “The big change since 2008 is that clients now want something that is very easy to understand,” says Zaimi. 

Pre-2008, the trend was for clients to be able to self-execute on complex products of their own making. Now they are looking for simple solutions to complex problems. “What we are doing is making things simpler for the clients, by leveraging recent technological innovations and delivering what we call the ‘digital’, ranging from execution to risk management and treasury tools,” says Zaimi. “Banks used to offer clients complex financial structures. Now we are offering them a sophisticated model of IT, quant and infrastructure, to deliver a much simpler product for a smarter use.

Simplifying execution today

Technology has made our personal lives easier, with simple and intuitive solutions. HSBC teams are striving to do the same for their clients with seamless execution solutions across asset classes. Greg Pierce highlights the way that the bank is building a fixed income trading platform that pulls together all the different ways that clients can currently trade US fixed income products. “It is how we are helping our clients deal with the complexities and fragmentations that have crept into the market over the years,” he says. 

A further example in action is the bank’s FX execution platform: HSBC evolve. This is a full front-to-back FX new-generation execution platform, offering pre-trade, trade and post-trade services, backed by a deep set of analytics, all delivered on a desktop today and on mobile in 2017. The power of the platform comes from the way that the inventory management system is digitalized, allowing the bank to offer real-time pricing and tight execution spreads. With its fast and flexible features, HSBC evolve is meant to be intuitive and interactive by providing ease of execution, a high degree of automation, deeper visibility into positions and strategic self-service tools. 

In addition, HSBC has designed a range of algorithmic strategies to improve execution, as well as  support risk-management objectives using advanced and sophisticated quantitative-based models. “We have invested in technology to develop tools addressing both the needs for efficient, transparent execution and robust risk management, such as algos and transaction cost analysis (TCA). These solutions are made available to clients to support them proactively in these areas while giving them autonomy to do so” explains Zaimi. 

Sharpening risk management

Hossein Zaimi 160x186
 Hossein Zaimi, Head of 
Trading, Asia Pacific

The fragmentation of markets and competitor adoption are driving the increasing use of algorithmic trading. What used to be limited to liquid pairs’ trading is now increasingly available across the whole currency spectrum. And as clients need to meet their regulatory obligations not only to report what they traded, but how they traded, then the use of automated tools for trade execution becomes a necessity, not a luxury. 

There is also the opportunity for HSBC to tailor specific solutions for clients facing risks generated by current market volatility. For instance, insurance companies seeking to maximize yields by going into new markets need to hedge increased currency risks. Or pension funds seeking to move further out on the yield curve, despite its recent steepening, might seek to use derivatives to hedge their duration risk. “Currency risk is among the key challenges for our clients with global operations. We are supporting clients in two ways: using technology to actively manage risks and tailoring specific solutions relevant to their needs, such as dynamic hedging,” says Pierce. 

Risk management is a key component of the Dealing Room of Tomorrow programme. For instance, with certain event types such as Brexit or the US elections, HSBC’s teams anticipate every possible scenario to make sure they provide relevant solutions, whoever the client is and whatever they need to do. This approach and the commitment of its teams globally led HSBC to be named Best Brexit Bank by Greenwich for offering clients the best trade ideas and solutions on the UK’s referendum on European Union membership. 

Shaping the future together

The Dealing Room of Tomorrow’s approach is a reflection of how HSBC Global Markets is seizing opportunities arising from the changes on the trading floor today and tomorrow. The programme is augmented by client feedback and discussion, with both the buy side and sell side to identify their challenges.

But meeting their needs is a constantly evolving process. From Europe to Asia Pacific and the US, HSBC’s unique global footprint gives it a diverse range of clients, who are looking for different products and different trades at the same time. “Our clients make trades with HSBC for a variety of different reasons,” says Zaimi. “This gives us a diverse and uncorrelated set of flows, which means we have much more opportunity for finding buyers and sellers. This in turn means we don’t have to rely on external liquidity and so we can make sure our clients get the best possible prices in all market situations.”

Having a diverse set of clients requires a dealing room to be able to offer a certain level of customization. “Our heavy investment in infrastructure recognizes that we have different client needs and that our retail clients are different from our commercial or investment banking clients,” says Zaimi. With the scale that HSBC possesses, these solutions can be fashioned to meet each client’s diverse set of needs even in an ever-changing environment. It is a virtuous circle, which allows HSBC to be at the vanguard of market innovation.

How it works

An airline based in Europe allows its consumers the flexibility of paying for their tickets in euros or the currency of their choice. By connecting to HSBC Flexrate multicurrency pricing, we enable this airline to electronically hedge their receivables in a way that suits their risk appetite and business requirement needs.  Flexrate’s ability to cope with nuances in our clients business means we can provide the same level of streamlining and efficiency, regardless of the FX requirements. The control and transparency that HSBC enables through our electronic connectivity gives the airline the ability to add an extra revenue stream to their enterprise and at the same time provide a refined consumer experience.

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