Spending on Single Dealer Platforms


I recently attended an FX conference hoping to hear a spirited panel debate on the future of ‘Single Dealer Platforms (SDPs)’. I was therefore somewhat surprised to hear the chair suggest that the future was actually through multi dealer platforms (MDPs) – his plan worked, as the debate was pretty poor until that point, and certainly livened up after that!

Being in the audience and not on the panel, I bit my tongue as long as I could, in order to allow the panelists their ‘sponsored air time’ (one bank, one MDP, and two others).

But in the end, I had to raise my hand and proceed to explain why (in my opinion) that was not the case, and that volumes traded through single dealer platforms were running at twice the levels traded via the multi dealer platforms (see my previous blog on eFX volumes Single dealer vs multi dealer).

Working for a technology company, and engaged with many leading banks that are building new SDPs (and aware of all the other projects that we are not involved in) we see banks investing like never before to build, overhaul and upgrade their existing (legacy) platforms not just in FX, but as part of a multi asset client facing strategy (although it may start in FX).

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).

But for many others, the investment in SDPs is being done to build stronger relationships with clients, gain more flow, which can be highly profitable to banks that have the ability to fully internalize these FX flows (see what’s so great about internalising FX flows?).

Some banks are learning, and they are now thinking how they can convert what was ‘just’ an execution platform, into a rich Relationship Channel. In order to make platforms more intuitive and stickier, banks are starting to integrate their research (see research and trading converge to make SDPs stickier).

The new research report from Aite Group, certainly validates what we are seeing, which is that bank spending on SDPs is continuing to grow and at a strong rate (Aite report on SDPs).

Whilst banks may have the budgets for their new SDPs, and the strategic vision, they don’t always have the skills they need in-house in order to execute on their strategy. Which is why increasingly, we are seeing banks turn to external companies (like us) in to provide either the technology or the UX design skills needed to enable them to rapidly build and deliver new compelling client facing Single Dealer Platforms.

3 Responses

  1. Hi Paul

    You refer to your previous blog on volumes, that uses data from the 2007 Triennial survey – do you have any update on that from this years survey? do the numbers still reflect opinion from your piece?

    regards, Declan

  2. Hi Declan, glad to see you reading our blog 🙂

    I have blogged about the BIS 2010 report, link is here: https://singledealerplatforms.wordpress.com/2010/09/01/global-fx-daily-turnover-reaches-4trillion-up-20-according-to-bis-triennial-survey/

    However, the BIS 2010 survey does NOT break down the execution method by single / multi dealer platform. The 2007 raw data did not either, but the BIS provided a supplementary paper here: http://www.bis.org/publ/qtrpdf/r_qt0903h.pdf which did just that. I will be emailing them to ask if they have similar for 2010.

    Regards

    paul

  3. […] with a deep understanding of their clients risk management requirements. They also have the ‘luxury of large budgets’ and correspondingly large and talented in-house technical competence required to develop and deploy […]

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