"Just the bill, please"

One bank, one market, one leader

Last week I was swift to attribute my foul mood to the poor old press office at Deutsche Bank. I must confess, I was a bit harsh in my criticism. This week, I am much calmer and I have been radiating an altogether sunnier disposition, despite the atrociously wet and despondently grey weather we’ve been having in London. And guess what? Deutsche has played a key role in improving my frame of mind. I am currently getting on with the bank very nicely. Hopefully this state of affairs will continue, despite what follows.

I was recently out on the sauce with a source who knows Deutsche and its workings extremely well. He told me an amusing story about how, when Deutsche’s sales staff log on to their systems, a cartoon of Zar Amrolia, the bank’s global head of FX, pops up on their screen. Animated Zar then exhorts them to go and get their clients to vote in the Euromoney FX poll. Deutsche’s staff, I’m told, refer to the cartoon as their little “Desktop Zar”. What a funtastic place it must be to work.

I asked Deutsche to send me my own Desktop Zar so I too could be exhorted on to greater things, but the bank declined. I’ve also failed to persuade any of my mates at Deutsche to send it over to me. It seems the power of Zar is all pervasive and they fear the consequences of such action.

However, all is not lost. As those of you who have seen our little football game know, we have the talent here to create nice caricatures of bankers. Expect one of Zar to appear in the pages of Euromoney soon. Failing that, I might get one of me, exhorting you all to send me your buzz.                                                                                                      Urgent update: Desktop Zar

Putting the hospital into hospitality

  

Word reaches me that a recent Citigroup client jolly to the ski slopes of Europe, which was totally unconnected to our FX poll of course, didn’t quite go as smoothly as possible. In fact, it resulted in three people having to visit hospital.

Somewhat unfortunately, one of them was a client who damaged his knee. This is very easy to do when skiing, as I know all too well. The client comes from a prominent fund manager.

I tried discretely to find out who the two injured Citi bankers were. The bank wasn’t making it too big a secret, but purely by coincidence, I bumped into one of them, Roland White, at Euromoney’s FX markets summit in London this week. Noticing he had his arm in a sling, I put two and two together and asked him if he was one of the damaged three. Somewhat sheepishly, he admitted he was and gave me some of the details. Poor old Roland took a tumble on the first day. He insists it had nothing to do with the night before.

Sign off on this

Following last week’s column when I mentioned some over-indulgent client entertainment by a certain forward broker, I received what is purportedly a receipt from another lavish broker-client bash. This shows the details of a rather large bill that was racked up at a party following the Brit awards in mid-February. This is a ceremony when various music industry big knobs, and some small ones as well now I come to think about it, get together in an orgy of self-congratulatory back-slapping in London. In short, the sort of do that no ostentatious broker can miss.

At first glance, the bill looks a tad outrageous, detailing how close to £27,000 was whittled away at London’s Movida nightclub on mainly Cristal and Dom Perignon champagne, with a few bottles of fine wine and some cans of Red Bull thrown in for good measure. Note that there is no food on the bill. The rumour is that it belongs to either a fixed-income or FX broker. One of my old muckers, who is a big cheese at a company I would have put money on being the culprit, says his staff tried to get the bill past him as a joke. But apparently they weren’t actually there.

Anyway, on closer reflection, it doesn’t look too outrageous. The amount of wine consumed suggests that a lot of people had a good night out. I’d guess the evening worked out at around £3,000 a head. More than I could afford, but not that much in the greater scheme of things. I’d love to hear if the bill is genuine and who it really belongs to. CLS considers pre-netting

I went to an excellent presentation on algorithmic trading and execution at the Euromoney FX markets summit. This was given by Morgan Stanley’s head of FX e-commerce sales, Jeremy Smart, who is always entertaining. Poor old Jeremy got a bit stitched up last year when some of his frank comments at a breakfast briefing he gave were reported in a sensationalist manner; it appears he has had some of his natural wit media-trained out of him. But he still managed to come up with a couple of crackers.

The biggest laugh came when he was asked at the end of his presentation by Rachel Hoey from CLS what he saw as the most likely brake on the market’s future growth. “CLS,” he immediately responded, with almost a straight face.

CLS’s refusal to accept pre-netted trades for settlement has caused a lot of debate in the market – it’s something I’ve written about in various stories over the past few months (see Euromoney December 2006, ‘CLS blocks FXMarketSpace’s plan to pre-net cash trades’). However, rumours have been circulating that CLS is now considering allowing it. As the global head of one major player responded when I asked him if he’d heard anything: “CLS pre-netting is the talk of the town, but I’ve heard nothing concrete.”

Naturally I got in touch with CLS. Jonathan Butterfield, executive vice-president of marketing and communications, confirmed the company is looking at the viability of pre-netting. Despite the fun and games, and surge in volumes triggered by events in the emerging markets, this is arguably the biggest news in FX this week.

So why the apparent softening in CLS’s attitude? Butterfield says that CLS is aware of market developments, particularly the emergence of high frequency trading. He says this has caused capacity constraints on ticket processing at some banks, which of course few ever admit to (see Euromoney November 2006: ‘FX: A bulge in the back office’) while others are getting ever more fearful that it will do so in the future.

Butterfield adds that CLS’s board has been looking at the issue for around a year now. Last month it decided that it really needed to examine what it should do. As part of the process it has now started an investigation and will report to the board after the company’s AGM in April.

Apparently, CLS has received mixed messages from the market, which is not that surprising given the diverse nature of its participants. Clearly those with strong prime brokerage offerings see pre-netting as a necessity, while others are more concerned that if it is introduced it will cause them to have to restructure their back-offices and re-employ staff. Of course there are those who don’t have the same ticket processing pressures and simply don’t see the need for change. Given the structure of the market, it is likely that most fall into the latter camp, while those few players responsible for the majority of the volume fall into the former.

I get the feeling that CLS is preparing to embrace the change, which not only has huge ramifications for its business model, but also the wider FX industry. Butterfield says that if it does decide to accept pre-netting, CLS will move quickly to develop its own solution and then implement it. This is unlikely to be monopolistic in nature.

Clearly there’s going to be a lot more on this. It will be interesting to see how the regulators react if it does go ahead. Now that CLS is here, I for one can’t see them letting it get destroyed by a fundamental change to its business model. Despite the gripes over costs, there is no doubt that CLS has largely done what it set out to do, which is eliminate settlement risk (see Euromoney November 2005: ‘CLS passes the Refco test’).

People moves

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  Lee Oliver can be contacted at fx@euromoney.com.           

      

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