Darryl why did you join DIGITEC?
I joined five months ago as Head of Business Development and Partnerships. I have known DIGITEC and the people who work here for many years and have seen first-hand how their products are used by a large number of banks of all sizes.
It was a pretty easy decision for me to join DIGITEC because they are recognised as one of the leaders in FX Swaps and NDF technology and importantly are committed to innovation and market evolution. This role has allowed me to leverage my contacts and meet with banks and trading venues to capture new opportunities as FX Swaps trading workflows become increasingly automated.
How is the FX Swaps market evolving?
I started my FX career in short date sterling Swaps in London, where I learned how to manually calculate daily points, which were often wrong! So it’s great to see the automation and efficiencies that DIGITEC has created in this market.
For the following 40 years I worked in the Spot and NDF markets – so now I have come full circle. The Swaps market is following a similar automation path to Spot. It’s probably 10 years behind NDFs and between 15 and 20 behind Spot – but catching up rapidly.
Driven by client demand, the availability of more data, and advances in technology FX Swaps continue to grow and the market is evolving to be more electronic. As banks focus on automation and control, they are looking to streamline their workflows – to reduce manual processes, improve accuracy, and ultimately deliver better pricing to their clients. Even to help them scale their FX business.
The days of managing a Swaps desk using Excel are long gone. Banks now demand sophisticated pricing engines, which can price along the forward curve in multiple currencies, and update automatically as market data updates. With more electronic trading there is enhanced access and transparency, but there is also increased market velocity driven by e-trading, automated workflows and the growth of matching platforms. In this market fast, accurate and robust pricing engines are essential.
More data than ever is available, and this trend will continue. But the data needs to be captured and modelled to enable improved pricing accuracy. For banks and traders to build and maintain their own curves, data like our Swaps Data Feed (SDF) allows them to improve pricing accuracy and extend currency coverage.
The Swaps market is also evolving at the interbank level, where electronic interbank platforms like 360T SUN, LSEG FX Forwards Matching and 24X are live. As more volume migrates away from voice trading and onto these electronic platforms we expect to see better risk management, more efficiency and better pricing extend to the dealer to client (D2C) segment.
What have been your highlights since joining DIGITEC?
On the business development side we have continued to grow, increasing the number of clients by 13% over the last year. While we have gone live with banks of all sizes we have seen most growth in the regional bank segment, many of whom began by using our D3 Lite service before upgrading to the full D3 pricing platform.
On partnerships we have made significant progress with D3 OMS, our workflow automation platform. D3 OMS enables traders managing FX Swaps risk to connect directly to interdealer FX Swaps venues and efficiently place and manage orders on 360T SUN, LSEG FX Forwards Matching, and 24X. We expect more volume to migrate to these interbank electronic channels, as we add new venues and onboard additional clients to our platform.
In response to client demand we have launched a new service called D3 Channels, which is live with our first client. Designed for banks where traders and eFX businesses distribute prices to clients, D3 channels allows them to establish easily maintainable, rule- and scenario-based logic that automates pricing decisions based on tier, volume band, and destination. This ensures that the system determines the exact price to be sent in response to downstream requests, alleviating pressure on traders during potentially high-stress market situations.
How do you expect the market to evolve in the future?
As the market grows we are seeing an increasing global demand for FX Swaps and NDF trading technology solutions. Technology is evolving rapidly meaning that complex workflows can be automated – what previously had to be managed by a person can be automated with the right technology and coding expertise.
The next stage of market evolution is the growth of liquidity further out along the curve. The development of algo trading is dependent upon how fast the market evolves and as liquidity is built further out than Overnight or Tom/Next. There may be a few liquidity seeking algos that will work for FX Swaps, but their impact will be low with the current limited liquidity.
Pricing models will continue to evolve as they capture data from an increasing number of related markets. Instruments like the one-month and three-month USD SOFR Futures need to form the backbone of FX swaps pricing, supplemented with market data from other assets, creating the need for a pricing model that is able to combine multiple assets into a cohesive model. For example, banks are now using our D3 pricing service to build their curves using data sources including FX Swaps and Forwards, FX Spot, STIR Futures, OIS, IRS and Cross-Currency Basis Swaps. As new data sources from different markets become available the more technologically advanced firms will subscribe to this data to give them an information and speed advantage in FX trading.