Whilst the number of clients and the volumes they trade on-line continues to grow strongly, there is a hard core who resist the opportunity to jump on board. The reasons for this are concerns around security, implementation / integration of technology and the availability of straight-through processing (STP). There is also a real perception among a significant number of those abstaining, that on-line trading is only for those who have large transaction volumes Ã¢â‚¬â€œ though with single dealer platforms now offering greater functionality this is becoming less of an issue, hence encouraging some of these abstainers to trade on-line.
RBS has a tremendous commitment to eCommerce and youÃ¢â‚¬â„¢ve developed one of the most comprehensive and innovative eFX product suites available. Some banks however, are still trying to assess the benefits of their investment in e-trading technology. What makes you confident yours is paying off?
We believe that our significant commitment to eCommerce is delivering benefits, as we continue to see strong growth in our electronic volumes. We have also acquired new clients due to our electronic execution tools. Because of this investment, we now enjoy significantly deeper relationships with a growing number of our corporate and institutional clients whilst at the same time being more efficient in the way we service their FX requirements.
What do you think is driving the recent growth in eFX volumes that many banks are reporting?
The recent growth in our electronic FX volumes has been driven by a number of factors, which include the following:
Ã¢â‚¬Â¢ An enhanced streaming application particularly via an Application Programming Interface (API) which is attracting new buy side clients who are familiar and comfortable dealing electronically because of the financial assets they have traded in the past.
Ã¢â‚¬Â¢ Increased functionality by multi-bank platform providers is also attracting new buy side clients into the market.
Some banks see themselves as liquidity and risk management providers and others more as technology providers. How would you describe RBS?
RBS is very much a liquidity and risk management provider but uses technology to acquire and distribute liquidity.We believe our core strength is risk management but also believe in providing our clients with the ability to source liquidity in the most efficient manner possible hence our commitment on being a top tier Global FX house. Overlaying all of this is a focus on relationship management.
You have created a suite of execution tools that can be packaged together to cater for practically any trading requirement a customer may have. Do you see this ability to offer clients a tailored technology solution as a key differentiator amongst FX providers?
RBSÃ¢â‚¬â„¢s approach has been to respond to our client needs through the provision of a suite of execution products, which have been developed to enable our clients to access our liquidity and STP capabilities in a way that allows them to resolve many of their treasury and transaction issues. Because each client has a different set of requirements, we believe our tailored portfolio approach will help our clients best meet their execution and post execution needs.
A major growth area amongst single-bank offerings is benchmarking. How has your own product, RBS FiX, been received by clients and which type of customer is it aimed at?
RBS FiX, in association with EBS Benchmark, has been one of the highlights of 2004. Across companies of all sizes and industry segments, the demand has been overwhelming. RBS FiX is now being actively used by clients who are looking for additional levels of price transparency, an enhancement on the level of internal control around their transaction management process or are looking to operate within a tighter regulatory environment or treasury policy. We see this as a very important innovation, which is destined to continue growing strongly.
With more sophisticated clients benefiting from the increased price transparency that online trading brings, options are becoming an area of increasing focus. How are you helping clients to become more comfortable trading larger amounts and more complex products, like currency derivatives, electronically?
We are continuously enriching our options online functionality and to that end recently launched a Dual Currency Deposit (DCD) offering which is already experiencing strong trade volumes. As our clients increase the average trade size on other derivative platforms and additional functionality is introduced, trade sizes in the online option world will grow.
Some believe that getting an API on the clientÃ¢â‚¬â„¢s desktop will secure the flow. Do you agree with that and how important do you think APIs will be, in shaping the future of eFX?
The awareness and use of APIÃ¢â‚¬â„¢s has increased significantly in 2004 as clients have become more sophisticated in the way they use technology to trade FX. APIÃ¢â‚¬â„¢s are bringing real benefits to our clients in terms of giving them access to full STP, efficiency savings and in some cases the potential to generate new revenue which in turn is leading to greater trade volumes from clients using APIÃ¢â‚¬â„¢s. Our aim is to develop segmented APIÃ¢â‚¬â„¢s based on different trading styles and to make these integrated so that clients can have access to different pricing methodologies to manage varying aspects of their trading activity. We believe APIÃ¢â‚¬â„¢s will be a significant influence in the way the FX market moves forward and have developed our offering with this in mind.
New services such as White Labelling and Prime Brokerage are currently dominating the eFX landscape. In the future, where do you think the main e-service growth areas will lie in the FX industry?
As we look out into the future, I predict growing demand for on-line functionality in areas such as IAS39 and quantitative tools, such as our Trade Weighted Average Price (TWAP) benchmark, which we believe to be a close proxy for VWAP for the FX market. Having introduced these offerings earlier this year, these tools are attracting significant client interest, which is likely to grow as we expand the functionality available in response to the requirements clients are now presenting us with.
Finally, youÃ¢â‚¬â„¢ve said in the past that the Ã¢â‚¬ËœeÃ¢â‚¬â„¢ in eForex should really stand for Ã¢â‚¬ËœexpectationÃ¢â‚¬â„¢. What did you mean by that?
When I said that the e in eForex meant expectation, I was making the point that increasingly we are managing our clientsÃ¢â‚¬â„¢ on-line expectations and experiences. The more positive these experiences the greater our clientsÃ¢â‚¬â„¢ expectations will be which, if fully met, leads to greater trading volumes being transacted electronically over a broader set of instruments. It is the management and meeting of these expectations, which will sustain the on-going demand for electronic trading services and create the new offerings that will meet the clientsÃ¢â‚¬â„¢ needs of the future.