Andrew Kidd Executive Director, European Head of FX eClient Development at Abn Amro
Andrew Kidd Executive Director, European Head of FX eClient Development at Abn Amro

With Andrew Kidd, Executive Director, European Head of FX eClient Development at Abn Amro.

Andrew, the e-channel has benefited from a number of pioneers on the buy-side who recognised the benefits of e-dealing and gave a lead for others. On the sell-side, is it the role of the major global liquidity providers, like Abn Amro, to be the pioneers and if so, does that confer any competitive advantage?

Our strong belief in the concept certainly contributes. However, being a major global provider, with access to the resources that go with that, in what is in effect a technology arms race, is vital in retaining our edge. The winners on the sell side are both the largest players - who will continue to become larger in the consolidation we are witnessing - and those with the entrepreneurial vision to see where the market will be in the future. The other beneficiaries are the new players that have been able to start from scratch with a very low cost base, not get caught in the internet bubble a few years back and have strong technical capabilities.

Abn Amro launched its proprietary trading platform, DealStation in 2000. How different is the platform today from what it was 5 years ago?

Visually the platform has not changed a great deal, but much has gone on at the back end and behind the scenes at the very core of the systems. Automating more currency pairs, improvements in our electronic pricing tools and to speed of price delivery and rate management have all been key in delivering a very strong offering that has allowed ABN AMRO to see a large percentage increase in on-line activity.

We have also focused on delivering where our clients have demanded our time and effort – for example on providing liquidity directly to clients via an API. In addition the processing side has been important, particularly through the various FX Prime Brokerage initiatives. This has created efficiencies for all parties.

The bank offers a very broad range of e-Trading services. Have you made any key recent enhancements to these or to the functionality of the DealStation platform?

Technology continues to develop and allow greater efficiencies. DealStation has recently been joined by DealStream, a lightweight GUI addition to our newest, evolving API technology, aimed primarily at the professional trader with its quick one-click environment. We are also working alongside colleagues elsewhere in the bank - especially in Trade and Cash management - to develop an all encompassing treasury portal that will incorporate a range of tools – such as FX&MM, liquidity management and cash management - in one site. This will be relevant to the full range of clients but will have a significant impact for SMEs and corporates. We also continue to fully support initiatives from the major ECN’s who serve the needs of clients that prefer or need a one-stop shop for technology connectivity.

You operate eDesks in Amsterdam, Chicago and Singapore with specially trained e-commerce support staff. What impact has this strategy had on your success as a leading eFX provider?

Client Relationship Management is more critical now than ever before in the market. From the outset we knew that the service we provided around our technical offerings would set us apart from the competition. Providing a combination of technical, market and client specific support from our key regional hubs has created a unique bridge between our internal groups and clients, helping to make the whole process as seamless as possible. This one-stop-shop approach gives our clients a more in depth relationship, rather than the ‘faceless’ administration function that call centres provide.

Offering a comprehensive suite of e-products is essential for client acquisition. Do you think that’s enough for eFX providers to successfully retain them and secure their loyalty?

Different clients have varying needs and buying patterns. Functionality alone will not necessarily buy loyalty, but it is essential. We have to remember what our underlying business is about - providing ample liquidity, competitive pricing and efficient transaction processing. So, for the most part, loyalty is secured by creating an environment that creates a fast, secure trade execution on a stable technology environment with no - or low - incidents of error, improved price transparency with access to an automated settlement process.

Many banks are reporting rising e-volumes. What other factors apart from improvements to the functionality of their offerings are likely to be responsible for this?

One of the reasons for the rising e-volumes directly relates to the overall growth in institutional interest in FX as an asset class. Client driven demand for technology enhancements from their bank’s proprietary platforms, coupled with the rapid growth of multi-bank platform liquidity and functionality, have also contributed. Another factor is recognition by clients of the benefits of electronic execution, mainly from the standpoint of ease of execution. As clients continue to source market liquidity on varying e-channels, banks that are clearly in this space recognise the need to be integrated to all potential client touch points (proprietary platforms, multi-bank platforms, ECNs). We recognise this evolution and are well positioned to meet these needs and capture client flows.

Do you think that the growth of new client numbers using the e-channel is to some extent concealing the effects of consolidation within the industry and we may not really see the effects of this process for some time?

With so much emphasis placed on the larger institutions, all of which seem to be doing ever increasing volumes the answer is a resounding yes. We live in an era of banking industry consolidation, let alone FX consolidation, and the dialogue in any conversation always comes around to what next for the marketplace, with a single exchange being the primary discussion point. Having created a series of mini exchanges around Single Bank Portals and ECN’s, a lot of effort is being pumped into outsourcing, Prime Brokerage and CLS initiatives. These may herald the coming of an entirely different industry business model. Whether it comes in three years or 10, or at all, this year I believe will be a pivotal year for determining the final outcome.

Abn Amro has participated on a variety of the multi-bank platforms and clearly supports their value proposition. Do you anticipate that single bank platforms and multi-bank portals and aggregators are likely to co-exist for a considerable time to come?

We have never hidden the fact that we will support our clients with liquidity and other ancillary services on platforms that we feel will gain sufficient traction. With so many of our clients equally happy with our proprietary offerings, as the market stands today, single and multi-bank offerings can comfortably co-exist. Indeed I believe it is healthy for the market that they do co-exist. The one overriding aspect to this is the potential for a single exchange environment. Market forces are greater than any one or group of participants in the industry. If change in the markets takes us to a new way of doing business, there is little that can be done to alter that path or pace of change.

We are starting to focus on the opportunities presented by new eFX services like Prime Brokerage and White Labelling. Do you think that only the really big FX e-commerce players, like Abn Amro, with sufficient scale and leverage will be able to take advantage of them?

We are anticipating this year to be a big year for Prime Brokerage and similar services. Only those that have the scale and leverage will benefit, given the significant undertaking to provide the necessary infrastructure to support these services. We strongly feel that only banks like ourselves (i.e. those already leaders in the Prime Brokerage space) will be positioned to capitalise on the clear shifts of the market to prime brokerage services and white labelling opportunities.

You’ve said in the past that one of the greatest challenges facing eFX providers in meeting the needs of clients is achieving full integration of services. How much progress has Abn Amro made towards this key goal?

STP has been the holy grail since the earliest discussions of ‘e’ in FX. There are so many disparate systems, and many that are bespoke developments for clients, that for the most part the notion of banks becoming yet another software provider does not bear thinking about, regardless of the costs associated with it. So we have concentrated on offering our clients the benefits of integrated services by providing full access to the required data via our API’s. Those clients unable to do their own code writing tend to be driven to the ECN’s, who by definition of their role and position need to offer those integrated services. In a transparent marketplace that is witnessing spread compression and consolidation, the broader answer which will satisfy both the buy and sell-side going forward, is standardisation in software protocols. With the FIX protocol having played such a big part in the integration of services in the equities and FI markets, it will not be long before it is more widely used within FX, thus bringing the barriers to entry down.