Cyril Cottu executive director, FX e-commerce at Goldman Sachs
Cyril Cottu executive director, FX e-commerce at Goldman Sachs

with Cyril Cottu, executive director, FX e-commerce at Goldman Sachs & Co

First Published: e-Forex Magazine 14 / e-Forex Interview / April, 2004

Cyril, Goldman Sachs has built all of its foreign exchange trading systems in-house. What advantages do you think taking this approach has given you?

Building our systems in-house has given us an appropriate level of control in terms of cost and product development--both of which have prepared us for a long-term presence in this competitive market place.

In the past, you’ve told us how Goldman Sachs has always committed to developing technology that results in efficiency gains throughout the firm. How important has that experience been in helping you develop client solutions?

Not surprisingly given the way the market place is evolving, this has proven to be not only an internal advantage but a necessity in maintaining and enhancing our relationships with customers globally.

It’s been said that banks no longer compete on price in liquid markets but on their speed of pricing. Your own multi-product, web-based platform, WebET, offers live streaming RiskReversal prices. Do you think market demand for streaming rates will increase and ultimately mean the demise of RFQ?

Speed has always been an important part of pricing in FX. The competition is truly becoming even fiercer with e-trading and spreads have become further compressed . Having a sophisticated price engine that was built in- house has enabled GS to cope with different trading protocols and products which, once again, is key to being a long-term player in this environment.

Much effort was spent combining WebET with your research site. What benefits has that brought to clients?

Efficiency and optimal use of screen placement are two of the major benefits. Customers can see real-time trading commentary on the same page as dealable prices, real time charting etc…Our overall web services are very customizable and continue to evolve according to client demand.

Many banks now offer online pricing of forex options, but only a few offer full electronic execution. Why do you think most providers have failed to develop these full “click and deal” solutions?

To provide full electronic execution you need to have a very sophisticated volatility model, advanced technology and a significant appetite for risk. Only a few players in the market can offer this today. I am not sure there will be many more in the upcoming years…

Your own online FX derivative tool, Quote Online, is one of the most sophisticated available, offering pricing, risk management, structuring and click and deal execution. Are all types of derivative instrument suitable for online trading or do you feel some lend themselves more?

The more liquid and commoditized the product the more suitable it is for online trading. So, not all derivative instruments are suitable to make on electronic markets. Less liquid/more complex products require advanced capabilities and are probably reserved for top professionals, including those on the buy side.

FX Prime Brokerage clients have an increasingly broad range of platforms to choose from. Goldman Sachs’ own electronic FXPB offering has won much praise. What specific functionality does it have that’s proving most popular with clients?

Clients can roll spot trades forward at historic rate via the portal: Clients can also execute funding trades or roll net positions via the portal. Real-time, Trade-level portfolio reconciliation compares all outstanding trades in GS's systems with client's systems to ensure no "out trades". Global, real-time, 3-way matching of trade details between clients, give-up banks and GS. Capability to run trading/risk report and analytics.

Goldman Sachs provides liquidity and sits on the board of FXall and the firm also provides liquidity to State Street's FX Connect. Do you think the significant business growth of the multi-bank portals is likely to continue?

Yes, we believe that these two market leader platforms fulfill customer demand and will contnue to grow significantly. Different market players look for different solutions including in the multi-dealer space. FX Connect has been on the forefront of offering post-trade features for asset managers; they now compete with Fxall which has signifcantly improved what they offer in this segment. Fxall's primary focus had been on corporates. Given the continuous growth of FX electronic dealing and processing, these two platforms have good room for growth, and competition will only lead to a better and more comprehensive offering for the buy side.

With so many banks now offering online research, pricing, execution and back-office services, how do you see them differentiating themselves in the eFX space?

By offering superior reliability, pricing consistency and functionality across products and market segment, and by constantly thinking forward and reinventing ourselves.

Many believe the future of electronic trading lies with an integrated trading environment where platforms have the ability to support real-time trading of multiple instruments and asset classes. How close are we to achieving this?

This will be fairly complicated to achieve and not necessarily driven by the buy side. In the FX market alone, it is very likely that different platforms offering different pre-trade / execution protocol / post trade features will coexist for years.