This is the first of a series of posts about the multitude of ways in which single-dealer platforms are currently evolving.
The past couple of years have seen an unprecedented surge of SDP activity. Every single Tier One bank has embarked on a major upgrade of its legacy Web trading systems, while a large number of Tier Two firms have started building their own full-service SDPs. We are in a period of rapid product innovation.
Why? A common theme is that as spreads become ever more compressed and markets more transparent, “soft” factors come to the fore when competing for client flow. In a market where leading banks all offer similar pricing, multi-dealer platforms become less important and clients go for whoever provides the best user experience — which means the best SDP.
And yes, trading in liquid swaps is going to migrate to SEFs (though possibly not in FX). But most banks see that as one more reason to focus on providing great UX, so that when the time comes they can provide an effective and compelling service combining OTC and SEF-based trading.
This explosion of activity has been accompanied by a rapid expansion of the SDP space in several dimensions. The expansion is most noticeable along five axes:
- Geography — SDPs are now being developed and rolled out by banks almost everywhere
- Asset class — SDPs are spreading from their roots in FX into many other products
- Provider — SDPs are no longer the preserve of the largest investment banks
- Client segment — there is now an SDP offering targeted at almost every category of trading end user
- Functionality — SDPs are moving way beyond just execution
Over the next couple of months I plan to post articles exploring each of these topics, looking at what’s happening in the marketplace and where it’s heading.
Follow-up posts:
Filed under: Single-Dealer Platforms, User Experience (UX) |
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