It is only in the last 3 years that electronic platforms have become fast, liquid, easy-to-use, and truly value-added. The advent of Internet and web technology, and comfort with security enabled a much wider dissemination and acceptance of electronic FX platforms. Such widespread use as we have currently could not happen with slow dial-up systems needing desktop space at a clientÃ¢â‚¬â„¢s office. The time and costs of implementing hard-wired systems to achieve speed and reliability as in the interbank market were also quite significant. Clients now receive a wide range of electronic solutions, functionality, STP, and content to fit their individual needs, which further promotes client take-up.
Due to its position as one of the worlds largest commercial and custodial banks, Citigroup has a very powerful position in terms of extensive client relationships and guaranteed FX flows. How important has this privileged legacy been in shaping your FX e-commerce strategy?
We would not have an e-commerce strategy or business without our client relationships. Our FX e-Commerce strategy is completely shaped by the strengths of our franchise and our overall business strategy to develop and deliver customer focused services to achieve maximum customer satisfaction. Our e-commerce strategy is to develop and enhance customer relationships by providing world-class online transactions and advisory services that empower our clients to optimally manage their FX exposures. We have developed products and services to intelligently leverage the combined knowledge of our FX business and overall organization, externally and internally.
Client empowerment, in terms of providing information transparency, access to increased liquidity and value-added content are seen by many as good things. However, what risks, if any, do you think banks run by adopting this approach, particularly when dealing with increasingly sophisticated clients?
We believe that transparency of information and prices as well as truly value-added content actually enhance trust and our ability to properly serve our customers. The need to continually improve the transparency and functionality is a part of the reality of FXÃ¢â‚¬â„¢s competitive landscape. It requires banks to maintain a high level of investment in their technology and infrastructure. This investment ensures that accurate real-time prices are delivered to the customers around the globe and around the clock and the resultant credit and market risks of executed trades are managed efficiently.
Some argue that eFX capabilities alone are not guaranteed to win new business and that relationships are still of paramount importance. Do you agree?
I cannot agree more. FX always has been and always will be a relationship and trust business. If you do not have customers who see you as a trusted bank, no amount of eFX gadgets or capabilities will suffice. E-commerce products need to be an integral part of the overall service package that forms the fabric of client relationships. Our eFX offerings are built around listening to our customers and providing solutions that fulfil their FX needs.
People regularly comment on the wide breadth of features and functionality that are offered on the CitiFX website. What online offerings you provide, have proved to be the most popular with clients and are you planning any enhancements to them?
We have worked hard to develop web offerings that our clients find useful. In our pre-trade content, some of our most popular offerings include Corporate Risk Optimiser, CitiFX Flows, and Portfolio Optimiser. The Benchmark trading system is one of our most popular online transaction systems, which allows clients to submit orders against the CitiFX Benchmark fixings. We also offer indicative streaming rates for live-rate trading. In addition, our post-trade offerings include Confirmations-On-the-Web (COW) that allow clients to confirm and settle trades online and Portfolio-On-the-Web (POW), which allows customers to view and revalue all of their outstanding FX contracts with CitiFX. All of our Trade and Post-Trade systems allow quick integration with client systems via FXML. We are working on a number of enhancements to our existing offerings such as offering dealable streaming prices, new benchmark currencies and fixings etc. Our new FX outsourcing service targeted at regional banks, CitiFX White Label is a pioneering service in terms of its depth and flexibility. We are also launching FXCross in partnership with Instinet, a first-of-its-kind service that allows clients to anonymously Ã¢â‚¬Å“crossÃ¢â‚¬Â their orders against other clients at the Benchmark rate.
How important have your web capabilities been, when combined with FX solutions, in building electronic linkages between different product areas within the bank?
Extremely important. FX is one of the most important enablers of cross-border commerce and investment. Our eFX capabilities allow us to embed FX transactions into various product areas of the bank. We created the FX Ã¢â‚¬Å“Internal AlliancesÃ¢â‚¬Â strategy to develop new products and services that electronically combine FX with one or more Citigroup products such as custody, cash, stock plan services, fixed income, and equities.
ItÃ¢â‚¬â„¢s becoming quite difficult to differentiate between many bank offerings in the eFX environment space. With pre-execution services being effectively commoditised, how important do you think actions such as improving post trade services will be in helping banks overcome this?
Electronic FX has become very competitive as banks continue to enhance and add to their offerings. Post trade is definitely an important area to differentiate. I believe however that post trade solutions are not resolved solely as a result of intensive tool development or off the shelf solutions. Customers are less inclined to commit to the latest Ã¢â‚¬ËœcoolÃ¢â‚¬â„¢ release. Clients respond more positively to customized solutions and innovative services that solve their Ã¢â‚¬Ëœreal lifeÃ¢â‚¬â„¢ problems and help them optimize their FX strategy and process.
We are currently seeing a dramatic growth in a number of banksÃ¢â‚¬â„¢ B2B initiatives such as white labelling. How important are these type of activities to the bank?
We recently launched CitiFX White Label, an Internet delivered technology and liquidity platform designed to allow Financial Institutions the ability to offer their traders, sales staff, and customers state of the art FX technology coupled with CitiFX liquidity. The product embeds CitiFX liquidity within market leading dealing technology to allow banks to continue to manage their clients credit risk while outsourcing the market risk for specified currency pairs. Banks and other financial institutions form a critical market segment for Citigroup that we are committed to serve today and in the future. We have also been successful at embedding our dealing and confirmation technology into the processes and infrastructure of other businesses. These activities are extremely important to Citigroup as they enable us to fulfil market needs and maintain our leadership position.
On the subject of growth, now that online FX spot and forwards trading have gained mass acceptance, do you believe that Options and other derivative products, will be major growth areas in eFX, despite reported poor client demand?
More complex FX products like options as well as cross-product offerings will be an important growth area in eFX. 2002 is the year when eFX has come of age. We will continue to see a high rate of growth in FX e-commerce across simple as well as complex FX products as connectivity becomes easier and the benefits of dealing FX electronically accrue for the market participants.
The multi-contributor portals and their various trading models have been in the news recently. At the same time single-bank proprietary sites are back in fashion. Are these always likely to co-exist?
I do believe that single bank sites will continue to have their place in eFX. No one offering will ever be a solution to everything. Single bank sites such as our CitiFX Interactive website provide customized products and solutions to clients, which may not be available as quickly via the multi-bank portals. We strive to offer the mix of proprietary and multi-bank eFX offering that best meets the needs of a particular client.
What, do you believe, is currently the most important issue likely to shape the future role of e-commerce in FX markets?
I believe that the future of FX e-commerce will be shaped by how well all the participants in eFX, the banks, the intermediaries (multi-bank portals, technology vendors etc.), and customers, work together to achieve STP and other efficiency benefits in a symbiotic fashion. Electronic FX has the promise to promote the overall efficiency and long-term health of the FX market by fulfilling customer needs and bringing value to all participants.
Finally, what do you think is the greatest existing challenge to the widespread adoption of eFX solutions?
In my opinion, client connectivity remains the greatest challenge currently to widespread adoption of FX e-commerce. It requires significant investment in technology and time and in some cases redesign of existing processes to achieve true connectivity with both the front and back office client systems. This connectivity is essential to achieve the full benefits of STP that go beyond a FX trade and deeper into the treasury process in case of a corporate and into the portfolio management process in case of an investor. We strongly believe that continued effort and innovation in eFX will help surmount these challenges in the near future.