Single-Dealer Platforms: (6) the functionality axis


Previous posts in this series have looked at new ways in which single-dealer platforms are being used, and the evolving demands being placed on them. In this sixth and final post I’m going to look at the way in which the functionality being offered on SDPs is expanding to meet those demands and to provide a better user experience.

Early SDPs offered little more than execution services. In FX this meant streaming executable prices for majors in small sized spot trades, and RFQ (or RFS) tickets for everything else. In Equities and Futures DMA it meant an OMS/EMS centred around an order book or ladder. In Fixed Income it was mostly restricted to filtered inventory displays with the ability to pop up an RFQ/RFS ticket and do a trade.

Over the last two or three years, however, the more enterprising banks have started to differentiate themselves and add value to their SDPs via new and different functionality. This is particularly noticeable in four key areas: pre-trade integration, post-trade integration, new workflows, and better UX.

1. Pre-trade integration

The larger firms have tended to maintain a loose linkage between trading and research portals, typically amounting to little more than a way of opening a trading app from within the portal. There is seldom a way back — in other words, you can’t easily view related pre-trade data once you are in trading mode — and this token linkage has not proven terribly effective at converting portal eyeballs into on-line trades.

Meanwhile, firms catering to retail users have raced ahead, beefing up their trading offerings with pre-trade stimulus such as news, research, trade commentary, trade ideas, charting and technical analysis, all carefully integrated into the trading workflow.

While there are certainly high-end SDP users that have no interest in this kind of integration, many banks have a raft of smaller clients for whom it provides clear value. Morgan Stanley made a splash a couple of years ago with the launch of its Matrix offering, which provided this kind of integration in spades, and an increasing number of firms now see this as an effective way of winning more business.

More recently, there has been a lot of noise about including social media in the mix, especially in FX (see this for example — registration required).

2. Post-trade integration

Multi-dealer platforms such as TradeWeb and FXall have long used post-trade processing as a major value-add, pushing the time- and labour-saving advantages of STP as a way of getting more people to use their platforms for trades that they would otherwise have done by phone or on an SDP.

The biggest banks already provide this kind of service alongside their SDPs, but smaller firms have been slow to follow suit, mainly because of the cost and complexity involved. But it should be possible to do this by leveraging third-party clearing and settlement services, and there is a lot of scope for adding value.

3. New workflows

Provided a dealer is offering competitive prices and a reliable service, additional trading workflows become very important in attracting and retaining users. Simply saving a trader time in going about his or her daily activities can be very compelling.

Barclays Capital has demonstrated this well in its  BARX FI offering, where it has been energetic in adding innovative workflows to woo clients. These include a “compactions manager” that allows interactive pricing and collapsing of IRS portfolios (a process that previously required lengthy telephone conversations and exchanges of spreadsheets) and its “Turbodeal” feature for guaranteed one-click IRS execution on streaming prices (a feature previously confined to FX trading).

4. Better UX

In the world of online trading, User Experience (UX) design has progressed in the last three years from a virtually unknown  concept to a central issue. I’m not going to discuss UX in detail here, because so much has been written about it elsewhere (see for example these articles on Platformability).

But for anyone who hasn’t been paying attention, skilled UX design is now arguably the key factor in differentiating online trading offerings, and (if done right) governs everything else. In a sense this has always been so, since there always is a user experience, good or bad, and it is always designed somehow, by someone. But the difference is that in the past the design was done by managers, traders, business analysts and programmers, without any special UX training, and without any insight into the highly evolved discipline that companies like Apple have harnessed to turn their brands into market leaders.

Now, however, there is a general recognition in the marketplace that UX designers are skilled specialists that, properly employed, can add inestimable value.

And in the age of the iPad, users have little patience with poor UX design.

In conclusion

In this series of short articles I’ve tried to describe some of the ways that the world of SDPs has changed and is continuing to change. Looking back at some of the earlier articles, I can see that there have been further developments even in the few months since I wrote them.

I’m always keen to have feedback from others working in this area. I’m sure some of you disagree with things I’ve said, or have spotted important trends that I’ve missed. If you have anything to add, please comment on this post — or post an article of your own here!

2 Responses

  1. […] Single-Dealer Platforms: (6) the functionality axis « SerenDiPity, on September 19, 2011 at 5:49 pm said: […]

  2. […] will engage with Nordea’s target client segments, to ensure he identifies and can deliver highly valued client workflow solutions,  that will help differentiate Nordea’s new SDP […]

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