Christian Baudoin Global head of e-Forex at BNP Paribas
Christian Baudoin Global head of e-Forex at BNP Paribas

With Christian Baudoin, global head of e-Forex at BNP Paribas.

First Published: e-Forex Magazine 22 / e-Forex Interview / January, 2006

Christian, as the leading foreign exchange bank in France, BNP Paribas has made a very significant investment in developing your e-commerce products and services. Was that driven by direct response to client demand or is your strategy based around trying to anticipate your clients’ future requirements and providing eFX solutions to cater for these?

BNP Paribas has been an early adopter of e-commerce, participating in the launch of several multi-dealer platforms while implementing our own proprietary portal FX Dealer. With more and more customers adopting electronic channels, we have increased our investment in the “e-space”, to be able to respond more efficiently to client demands. BNP Paribas services a large range of customers with various electronic FX needs. Some of them were quick to embrace electronic channels and understand the benefits, rapidly becoming more and more demanding of products and functionalities. Partnering with the most demanding clients has enabled BNP Paribas to stay at the forefront of innovation and cater to future requirements of our global customer base. As a result, our FXDealer portal is constantly being upgraded with new features.

You’ve recently formed a dedicated e-Forex services team. What prompted that decision and what do you aim to achieve with this initiative?

The “e-space” is growing bigger each day with new users, new requirements, new products and new channels. With a landscape in constant motion, it is essential to be able to rely on a 24x5, dedicated team with the widest e-expertise, capable of rapidly reacting to market evolution. The e-Forex services team is involved in many areas such as business development, support, promotion and distribution and risk management. The team contributes to the fine-tuning processes and orchestration of BNP Paribas e-FX strategy. We do this with the ambition of establishing BNP Paribas as one of the best and most efficient e-FX providers.

Your client web site, FX Dealer, provides a full range of online currency services. Can you give us an idea of where you’ve recently been working to extend the functionality and features it offers?

The content and functionality of BNP Paribas' FX Dealer portal is constantly being expanded, much of which is now driven by customer feedback. Indeed, the latest enhancement to the functionality is the customisation of the live spot prices display. Customers can now select how they view the live tradable prices coming directly from BNP Paribas' traders. The full list of currency pairs can be edited by the customer, so that they can view only the currencies they require. Alternatively, customers can specify currency blocks, such as USD majors, Euro Crosses, Asia, Eastern Europe and Latin America. In addition to the live bid & ask, when detached in its own window, customers can format the display further by requesting information including the open, high, low and close, as well as the percentage change on the day. But, probably the most powerful piece of functionality is the capability for customers to create and maintain their own list of cross rates, for which live prices are displayed.

We reported in our last edition on how your own domestic market seems far less commoditised than many elsewhere and that this places particular emphasis upon bank relationships, which typically are very long term in France. Is the arrival of eFX likely to change that emphasis or the nature and way these relationships operate?

I do not think the “ vive la difference” reported in the October edition of e-Forex will live forever. Indeed, the French buy-side, like everyone else, is attracted by the benefits of the electronic. But this does not necessarily oppose a “relationship” way of looking at business. In many cases, an efficient e-offering reinforces the relationship between a bank and its customers. However, some customers still prefer to conduct their business traditionally despite the emergence of the electronic channels. This is where the long term relationship angle comes to play, we regularly update those customers with the evolution of the electronic markets to keep them abreast with the changes and we hope to start e-relationships at their convenience.

Online-specific volumes in France are rising quickly. How much of this do you think is attributable to French corporate activity and do you anticipate that further volume increases will be mainly driven by the corporate sector or will the adoption of the e-channel by other buy-side clients and non-bank FIs, start to have a major impact?

The evolution of the e-landscape in France is in line with what is observed elsewhere. French corporates continue to be attracted by the e-channels but non-reciprocal bank demands are growing more rapidly. However, the bulk of our expansion is coming from outside France, a trend that is likely to continue.

Being active in 85 countries, BNP Paribas has long had a very strong franchise in emerging markets – it is one of the oldest banking institutions in Asia, and is one of the top five traders in emerging market currencies. What plans do you have to leverage your e-trading capabilities in the emerging markets and extend your eFX services around the world?

Indeed BNP Paribas is the leader in the emerging markets with a rare capability to settle more than 140 currencies through our global network including of course Asian currencies. We are already distributing our liquidity for some of these currencies on our Proprietary Channel and Portals that we participate in. We will enhance these before the end of this year with increased coverage on more regional currencies like SIT, LVL, LTL, HRK, EEK and TRY. We will continue to do so wherever there is client demand. Under our FX Dealer proprietary portal we offer a unique suite of comprehensive tools on more than 140 currencies. This is one of the most visited sections of the portal.

BNP Paribas has also developed a strong franchise in currency options and derivatives. Your FX platform, FX Dealer, already incorporates derivatives functionality in the form of research, historical volatility, and strategies. Are you planning to offer online order execution for FX options and what are your other areas of investment going forward?

We are currently working on upgrading our FX options platforms with one project on “live pricing” and another project on “deal execution”. We plan to release the first one by the end of the first quarter of 2006 and the second one in the course of the same year. Going forward, we will increase our investment in Management Information Systems (MIS). By providing us with a detailed analysis of our electronic business, MIS will enable us to improve further our offering and better service our customers. We are also expanding the usage of algorithmic tools for proprietary usage and to offer pre-thought out and auditable strategy for customers.

Your bank has had a presence in FX prime brokerage for more than two years. Do you see it as a long-term growth market both domestically within France and internationally and if so, where do you see the interest coming from?

he size of FX prime brokerage will continue to grow with the market and as long as credit-related price gaps exists. It plays a complimentary role in the e-FX value chain and allows the lesser-known participants in the market place to leverage onto a more competitive playing field by using prime brokers. The growth is coming form all directions but most of it is internationally driven.

Acting as a primary FX market maker has clearly become too expensive in terms of investment and capital allocation for many smaller banks. Where are these smaller institutions going to be looking to derive their margins in the future?

FX market making has clearly become a giants’ playground not only in the terms you pointed out but also in terms of the risk warehousing. However, the smaller institutions have been working with the primary FX market makers to source liquidity directly, electronically or via the existing price discovery channels. As long they have clients and good portfolio management, there will be a place for everyone. All participants will have to run faster, but in the end the good ones will still give good returns to their shareholders.

How do you see the eFX market evolving in the next couple of years? Is it likely to be shaped by consolidation amongst online FX providers coupled with the arrival of increasing numbers of new, more active, buy-side trading participants such as Hedge Funds?

The market place will not stand still for long. In recent years, we have seen the convergence of the electronic platforms front GUI to offer streaming executable quotes. More recently it has been the ability of clients on the buy-side to plug in their APIs directly into the liquidity pool of the larger market makers or into electronic market places directly. Black box trading by buy-side clients is starting to make its impact on the tools that market makers use to gain new business. The volumes in this exclusive arena can be large and have the promise to provide the growth to the markets. Clients will go where they can find providers who can accommodate their business and give the appropriate level of service. BNP Paribas, the bank of a changing world”, will continue to offer its customers the best of the electronic as long as it brings value to all.