RBS - leading the way with integrated electronic FX solutions

e-Forex talks with Michelle Neal, Global Head of electronic markets at The Royal Bank of Scotland about the consolidation of the banks' electronic platforms and the continuing development of its best of breed FX e-commerce solutions and e-trading tools.

First Published: e-Forex Magazine 38 / e-Forex Interview / January, 2010

Michelle, RBS Marketplace, which was launched in 2008, is the Royal Bank ofScotland’s portal giving customers access to all of RBS Global Banking & Markets electronic solutions in one place. In what ways has your own role evolved and changed with the development of this new portal?

eCommerce has always been an integral part of the trading and distribution strategy at RBS with strong business engagement and consistent investment. In early 2008, we merged the Debt and FX eCommerce teams into an Electronic Markets function to leverage our combined strengths and benefit from the associated synergies. I particularly wanted to move away from the word “eCommerce” and onto something more accurate and descriptive of eCommerce in a financial markets business and so Electronic Markets was born. Around this same time, we launched RBSMarketplace (“RBSM”), a platform with a a common architecture for RBS to leverage and build upon compounding successes within the business. The line between the Electronic Markets business and our traditional businesses are more blurred as customers use electronic services and execution tools to compliment their relationships with RBS.

In addition, our touch points with the business have increased as clearing, credit risk, latency, and capacity are all factors that face both traditional and electronic businesses and need to be managed using better technology.  We are a major conduit and centre of excellence within RBS for realising these synergies.  My team has traditionally also been responsible for market structure initiatives and strategic investments within RBS.  Combined with a delivery capability such as Electronic Markets, you get a powerful and highly coordinated continuum of activity spanning strategic alignment in our core markets, product development and delivery and distribution channels.

So far, the progress made by Electronic Markets has been encouraging and RBSM has become a household name within RBS,  The bank as a whole has tried to leverage the cross product nature of our product offering and client base to achieve coordination in servicing our customers and efficiencies in technology spend and delivery.  Even the physical layout of our new offices in Stamford Connecticut is meant to create better communications and smarter uses of internally and externally facing electronic markets products.

What prompted the decision to integrate your e-solutions to create RBS Marketplace, given that each of the platforms were already successful in their own right?

You are correct, we had a series of strong electronic products across both FX and Fixed Income of a proprietary nature as well as the liquidity that we provide via third party platforms…but let’s go back to the concept of compounding success, and it’s just like compounding returns in investing. If other’s can build upon components in your electronic markets offering, like strategy, research, quant, execution and post-trade services, and PB you can move forward from the constant silo based mentality that hinders growth and is inefficient in utilising the bank’s resources. Working together and providing that platform for visibility and transparency of success allows for ideas to evolve. Research and strategy, electronic execution and post-trade services tend to be a common denominator in all businesses.

RBS - leading the way with integrated electronic FX solutions

Were customers already trying to create a single window internally to bring together the different trading platforms they trade on?

Many customers have either bought or built some form of electronic consolidation product for their execution needs. Sometimes it is a cross product bleed from an existing equities or futures application, a strategic Order Management platform allowing for tighter integration from the point of the investment decision through to execution and post-trade or simply an in-house effort to make their workflow more efficient. Whatever the need or underlying business, we try to provide scalable products and solutions that compliment that need and allow clients to leverage our services. We bring more than just tools but a wealth of knowledge and a concept of a trading community.

What instruments can now be traded on RBSMarketplace and what services are available? 

FX and Fixed income services such as strategy, research, and quant tools, compliment our execution services on both our proprietary and 3rd party platforms as it is crucial that clients can access the liquidity and community of RBSM via the channel of their choice.  Proprietary FX Options, Streaming rates,  Benchmark  trading, and Direct Market Access (FX DMA) continue to evolve and gain market share.  We also provide access to Futures execution and clearing and one of our newest additions to RBSM is Investor Products.  Our SmartPrime product is also a great example of giving clients access to hybrid product models and services.

How quickly can you get new users live on RBS Marketplace and has it broadened the range of instruments existing clients can trade through the bank – i.e. can existing clients from one platform automatically gain access to other products?

Cross product connectivity and speed to market is key to keeping your customers interested and satisfied and giving you a deserved place on the customer desktop. As stated before Electronic Markets tends to be the common denominator for many clients who trade multiple products with RBS. RBS has made great efforts to make a global model of client services and staff it with knowledgeable people who understand not only the business needs of the client, but also the technology needs. By working with the existing sales force as well as clients directly, the client services team can help the sales force fully understand the client’s cross product footprint to build a better relationship.

What feedback have your e-commerce teams had from clients about RBS Marketplace and what applications do you think particularly add value for customers and differentiate the portal?

We have had positive feedback from both our clients and internally from our Sales force but ultimately, it depends on the client base as we aim to serve up the right mix of product and services depending on client segment, user profile and even geographical location.

For the Real Money accounts the interest is in automation and providing transparency. This is our RBS FX Benchmark product which can be integrated into upstream and downstream systems at the client? and adds value but streamlining processes that need accountability and an audit trail.

In the Retail and Partnership arena, it is defiantly our FXMicropay business that is consistently winning market accolades and allowing our client to realize FX revenue that was previously being lost in the simple cross border nature of their business.

In the Hedge fund and CTA space it is our SmartPrime product that leverages our existing market connectivity to give funds access to the ECN Direct Market for Foreign exchange while leveraging a top rated FX PrimeBrokerage and risk taking team --combined with a automated services for rolls and position management for a new level of differentiation.

RBS - leading the way with integrated electronic FX solutions

To what extent can users customise their RBS Marketplace platform?

Dashboards and montages are overused terms. But RBSM is a montage of component applications that can be configured based on your access level and business need. RBSM.com, the portal side of our offering provides customisation and other personalised capabilities such as subscriptions.

Over the last few years e-Forex has been reporting on the continuing growth of Algorithmic FX trading and many larger banks are moving into this space to give clients access to this powerful method of trade execution. Is RBS looking to join them?

The visible growth in algo trading is coming from the high frequency shops that are contributing record amounts of turnover in the FX markets. RBS has supported many of these players with a highly scalable PB offering and more recently algo (instructional execution) via its SmartPrime offering. SmartPrime leverages our own experiences in optimising execution techniques and allow clients to tailor their execution to their own needs, choosing strategies that help minimise slippage, transfer risk or keep their anonymity. We will continue to grow these products with our own risk taking capabilities to help customers lower costs and build electronic partnerships with RBS.

Given the increasing interest in Algorithmic trading, many commentators expect to see rising customer demand for Research and Analytical (R&A) applications across all asset classes. What steps has RBS been taking to cater for this and offer new client interfaces for both pre-and post trade R&A?

RBS has a deep team of quantitative experts that have used the framework of RBSM to build research tools, bespoke query analytics and more recently its own models to help define optimistic execution strategies and entry points. Combined with regional quant specialists to answer specific question or help conduct TCA, we feel we have a winning formula for the future of a data driven word.

Are post-trade services, middle and back office processing and clearing systems all integrated into RBS Marketplace and how can the platform help users improve their straight-through processing?

I think people realize that Post trade services are important for efficiency purposes and controlling costs, but coming off the year anniversary of Lehman it is important to realise it is an integral part of controlling risk. Real time reporting and controls for clearing are a fundamental part of the equation.

By offering clients multiple ways of managing their trades, confirming their risk and margin is an integral part of the RBSM strategy. Staying aware of trends and being involved with market structure initiatives helps RBS to stay sharp and focused so we can pass that benefit to our customers. Our customers value an advisory service about how changes in market structure can affect them and what they should come to expect from their bank relationships.

Prime brokerage services have also been included in RBS Marketplace. What key functionality does your Smartprime module offer to clients and how do you see the FX prime brokerage model evolving, post-crisis?

Having a PB (or multiple PBs in the new world order) is a vital relationship service providing access to liquidity and risk management and increasingly to services like OTC clearing. This relationship has to go beyond standard services like trade give-up and extend into areas of added value such as legal, credit, technology, back office services and direct sales services and execution. Most importantly providing a packaged approach to these services helps customers to grow their own business, the ability to expand to other asset classes while using capital efficiently by optimising margin across their portfolios. RBS SmartPrime is just one tool that helps with the hassle of building or buying an execution platform to access ECN and RBS bank liquidity while also aiding in traditionally time consuming processes like rolling positions.

RBS has always had a very innovative and successful electronic FX option franchise. Do you expect to see the use of FX options continue to grow amongst currency traders and investors and in what ways are you looking to further automate FX options trading?

Absolutely. It is a major focus for the risk management and sales businesses at RBS as well as for Electronic Markets. Earlier this year, our FX spot and Currency Options businesses merged under the leadership of Mark Barnes on the trading side and Chris Leuschke on the sales side. This new organisational structure is enabling us to take a more strategic approach to all elements of FX and treat them as an asset class from a risk management perspective while providing a more integrated solution based service to our client which will obviously extend to our provision of FX services via RBSM.

Over the coming months, what work will your e-commerce teams be doing to further enhance RBS Marketplace to move it even closer towards the complete one-stop shop?

We will be focused on product coverage, workflow and the integrated provision of services to ensure our products continue to be best in class but accessible in a multi-product environment that considers the entire trade lifecycle and the changing market environment.

Like many large financial institutions, RBS has been dealing with difficult business issues arising from the global financial crisis of last year. Looking to the future, how committed is the bank to continue making the necessary investment required to maintain and further develop your world class suite of e-commerce solutions?

Its been said before but companies that are successful treat their investment in Electronic Markets as a strategic asset and not a liability or cost that needs to be assessed constantly based on market moods or modes. Sure there is always an element of cost: benefit analysis but you have to look at it on a holistic basis, rather than on a stand alone one – it is a core part of the franchise business and not a business in its own right. One thing is clear - the market will continue to evolve and those who optimise their spend in ways that leverage the existing talent will be the ones who will gain market share, become more profitable, have better client relationships and in general succeed.

As we said before, it’s not an optional business if you are a top liquidity provider. It is an integral part of the approach to risk management and customer work flow.