Philippe, what were the most important considerations when building your new e-FX trading platform?
Our new electronic trading platform, RBC DX, is a multi-asset platform incorporating FX. While RBC DX replaces our incumbent trading platforms, some of which have been in place since 1998, it goes much further than simply providing an upgrade. The RBC DX improved user interface offers our clients a single point of access to transact foreign exchange, bonds, money markets and deposits, as well as providing access to all of RBC Capital Markets’ research. The new technology was deliberately chosen to give us the flexibility to add new products and make enhancements in significantly less time.
What new developments have you been working on to enhance the platform?
To date, our focus has been on building out a new user interface that would allow us to retire all of our legacy platforms. Now that this has been completed, we are moving to the next stage of development which is to systematically add the product enhancements that our clients have been requesting through client surveys. Our new technology enables us to offer tools and functionality that could not be previously offered with our legacy systems giving us the ability to better address the evolving needs of our clients.
What new functionality have you added?
RBC DX offers many new features, such as desktop customisation, charting, and upload features for trade allocations, to name a few. Vast improvements have been made to our streaming rate component (Rate Watcher) and our FX order management system which supports new order types.
The ‘Rate Watcher’ component offers 1- or 2- click trading, forward streaming, ‘quick load’ amount buttons as well as displaying market spread.
‘Rate Watcher’ also supports two tile sizes to optimize client desktop real estate. To assist our clients in avoiding costly errors, clients can also configure ‘fat finger’ protection to prevent over sizing trades. Additionally, the Orders and Rate Watcher components mean that orders can be sent directly via RBC DX for processing, allowing us to monitor and execute them around the clock, securing the best rates for our clients. We are also focusing on improving upon core elements, such as the trade blotter so we can further streamline and simplify our clients’ experience on the platform.
While building RBC DX, we have also been investing heavily in its supporting infrastructure, particularly as it relates to pricing functionality. One of the many ways our clients benefit from this investment is through our improved API capabilities, as well as through the enhanced quality and reliability of our pricing. In parallel, we have built the necessary technology for price construction and are continuously investing in faster networks.
What about the back-end and the provision of straight through processing?
We have paid great attention to the infrastructure behind the front end RBC DX trading platform to significantly improve straight through processing capabilities and functionality.
Mandatory clearing for FX options and NDFs will have a significant impact on e-FX. We will be ready to adopt functionality changes to enable clearing, and we will be ready to build the remaining connections to give our clients, wherever possible, the straight through processing capability they are looking for. This means we have the ability to participate in whichever products they wish to clear.
Another change that will impact trading and back office systems is the introduction of FX OTC products reporting. Having already ensured that every trade is captured on the trade blotter regardless of how it is executed, RBC is ready to enable our clients’ ability to respond to the new requirements with easy access to their trade information. In addition, we will soon be adding post trade messaging services in partnership with an external vendor.
What further plans do you have for further building out your suite of FX e-commerce services?
With the single portal, multi-asset class capabilities provided by RBC DX, we are delivering a consolidated one stop e-trading shop for our clients. We are consistently adding functionality across all asset classes and expanding the breadth of the product offering to enhance the relevance of the platform for our clients across all market segments and regions. In the near future, this will include the introduction of options trading.
What would you say was your unique selling point?
A critical piece of our entire e-FX strategy is the ongoing sales support that we extend to all our clients. While technology is important, we recognize that sales support is critical. Behind RBC DX, we have a knowledgeable and experienced FX sales team available on a 24/5 basis to provide our clients with assistance, whether they are assessing our liquidity from RBC DX, a multi-dealer platform or a voice transaction.
Will certain levels of complexity, such as for exotic options, never be able to be traded electronically?
I don’t believe that is the case. We are in the process of rebuilding our FX options infrastructure, both from a pricing and a distribution standpoint, so that we can offer this product electronically. This is in the roadmap for 2013, but the first step is putting the infrastructure in place. At the very extreme edge, there are going to be some structures that cannot be traded purely electronically, but the vast majority of products are increasingly well-suited to be traded electronically as a result of the increased improvement of pricing tools.
How are you helping you clients meet the demands of new regulations?
Regulatory developments are being watched closely right now, and there continues to be uncertainty around the level of increased oversight and the changes to which products will need to be centrally cleared. Over the next 12 to 18 months, clarity and certainty will come, and it is important for us to be in a position where we can move very quickly to ensure that both RBC and our clients transition smoothly into the new regulatory environment.
Obviously regulatory change is going to be a significant theme for all asset classes, and foreign exchange is no different. The speed of changes in the market environment and the evolution of our clients’ requirements mean that the ability to use technology to respond to these changes rapidly is critical.
The pace of change in the market has dovetailed with the pace of technological change and this is opening up new business opportunities for our clients. We are increasingly seeing them come to us with new ideas for businesses they want to get into and they look to us for assistance to help them to achieve their goals. In almost all cases, this requires the application of technology to help them achieve their aspirations.
Finally, enhanced regulatory requirements will inevitably make it more expensive to do business, and we are in an environment where spreads continue to be compressed. It will become increasingly important for our clients to be able to execute their business in an efficient a manner as possible, and, as result, technology will become a significant differentiator.
How important is sustained investment in e-FX services to you?
Electronic FX is driving technological change in all underlying systems, since building front-end transaction scalability goes hand-in-hand with the ability to process and settle transactions error-free. The international reach of our business means we also have a global technology roadmap that spans from North America to Europe, Asia and Australia.
RBC has been continuously investing in our global FX capabilities. Earlier this year, we launched deliverable offshore Yuan (CNH) trading, and we recently became the first Canadian bank to act as a market-maker through the Reuters Trading for FX (RTFX) community, which encompasses more than 650 financial institutions. Over the past 24 months, we have also expanded our e-commerce group in order to manage the substantial growth in our client volumes traded electronically which is testament to our continued involvement and focus in e-Commerce, particularly e-FX.
We will shortly be adding two further multi-dealer channels bringing our total multi-bank solutions to eight. Combined with our continued development of our single dealer solution, RBC is committed to building world class e-FX capabilities for our clients.
How do you see the e-FX market evolving over the next few years, and what changes should we expect to see in the industry?
The unpredictability of the current economic climate is making future growth and investment, across capital markets generally as well as within this asset class, more challenging, but having a robust e-capability will enable us meet our clients’ needs and ensure future success. Consequently, we have invested significantly in e-commerce and across the entire e-FX infrastructure to develop a world class e-capability.
Although technology is lowering barriers to entry, it is also upping the stakes. As the e-FX market matures, we expect greater consolidation. The pace of change in technology is making it easier for providers to make the necessary investments to develop a capability. With that said, our experience indicates that having the size, scope and scale to be relevant to a significant number of clients requires ongoing investments and over time, due to the requirements of scale to remain competitive, there will inevitably be some integration between smaller firms and providers of scale.