Separating the men from the boys in global FX


It’s interesting to see recent blog comment regarding Morgan Stanley’s new Matrix platform, and what else is needed (in terms of full range of products) to enable them become a top five global FX house.

In my opinion, it’s naïve to assume that a shiny new User Experience (UX) and a more complete product set is what separates the men from the boys in FX.

Deutsche, UBS and BarCap have risen to dominate the global FX business due to three key factors:

1. Total commitment at board level to an ongoing, multi year, multi million dollar investments in FX technology

2. Deep understanding of liquidity, and continuous adaptive optimisation of back end FX pricing engines and risk management tools, and the ability to internalise global flows

3. Ability to deliver unique back end capabilities to clients across any platform

Once back end capabilities are in place, and you are able to internalise global flows, then you can start to package and provision your liquidity together with unique pre and post trade workflow services and deliver truly compelling and unique offerings tailored to each client segment, in your own new front end!

In 2007 I read with interest a quote that is even more relevant today – Zar Amrolia, Deutsche Bank’s Global head of FX, talked about continually re-engineering between 20-25% of his own business every year, in order to stay ahead, which speaks volumes about having a deep understanding of the market, and interestingly, their front end UX designs are not the most compelling on the street, but they can deliver appropriate levels of liquidity, and workflow solutions required for each client segment.

Currently, Morgan Stanley sits at 11th overall position in the EuroMoney 2009 rankings down from 10th place last year, with 1.95% share, compared to BarCap with 10.45%, and the mighty Deutsche with 21%.

However, if you take a closer look at the sub rankings Morgan Stanley features in only two of the four major segment categories: Real Money 11th, and Leveraged Funds 10th place. Yet, Deutsche, UBS and BarCap are all consistently in the top six in all four key segments.

The learning curve is very steep, and it will be interesting to see over the next few years whether Morgan Stanley has what it takes to stay in the top ten, let alone challenge the top three!

Previously posted on Finextra

7 Responses

  1. Your third point is something we can agree on Paul.

    It is why exactly why the leading institutions already in this space have chosen Nirvana. It is also why new implementors of Single Dealer Platforms view Nirvana as the platform of choice for the streaming of their data to clients.

    http://www.my-channels.com/blog/euromoneypoll.html

  2. [...] an earlier blog article separating the men from the boys in global FX I touched on internalisation of FX flow. It’s worth looking again at why this is so important to [...]

  3. [...] The top 10 has almost remained the same, with one new entry (and some slight shuffling of the deckchairs) and for the 6th year running, the mighty Deutsche Bank tops the poll – which is an amazing record! I touched on the factors that separate the top players in an earlier post here [...]

  4. [...] Banks are investing in their new SDPs to protect their existing client ‘franchise’, as well as to win new clients, and drive down the costs of servicing clients, by automating much more of the pre-trade, trade and post trade workflow. For the top global banks, it’s an arms race, and the costs are very high to play in that game (see separating the men from the boys). [...]

  5. [...] Costs will rise and revenues will fall: The sobering comment from Mike Bagguley (Global Head of FX Trading, BarCap), was that the implementation of global regulatory compliance, will result in a significant rise in costs for the industry, and a corresponding fall in revenues as banks and clients get to grips with the new paradigm. However, the bar is being raised, and those banks who fail to invest, risk being marginalised, and according to Mike, there are only a few banks will be able to compete globally – perhaps I should add the ability to provide global OTC clearing to the key factors that “Separate the men from the boys to global FX” an earlier blog here. [...]

  6. [...] banks in the global FX business are highly innovative, with a deep understanding of their clients risk management requirements. They also have the ‘luxury of large budgets’ and correspondingly [...]

  7. [...] Separating the men from the boys in global FX I touched what I thought were three key factors that led to Deutsche, UBS and BarCap dominating the [...]

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