eFOREX e-e-FOREX FOREX january 2006
transforming global foreign exchange markets
visit us at www.e-forex.net
What's a customer? - electronic FX converging the buy and sell sides
The Anonymous FX Trading Model - why is it so appealing?
Regional eFX perspective - spotlight on Scandinavia
FOCUS on Treasury Best Practice - the role of FX automation
l i q u i d i t y. . . r i s k m a n a g e m e n t . . . S T P. . . e - C o m m e r c e . . . l i q u i d i t y. . . r i s k m a n a g e m e n t . . . S T P. . . e - C o m m e r c e . . .
l i q u i d i t y. . . r i s k m a n a g e m e n t . . . S T P. . . e - C o m m e r c
HAPPY NEW YEAR! Susan Rennie
Susie@Aspmedialtd.com Managing Editor
Michael@Aspmedialtd.com Subscriptions Manager
burden. We have highlighted how extending the benefits of FX
Charles@Aspmedialtd.com Editor (FX & Derivatives)
Louis@Aspmedialtd.com Features Manager
STP and automation can assist in compliance with standards
such as Sarbanes Oxley and IAS 139, by eliminating all
Charles@Cjag.demon.co.uk Advertising Manager
Anthony@Aspmedialtd.com Commercial Manager
Helen@Aspmedialtd.com Production Manager
major topic in this edition has been the role that eFX
systems are playing in helping organisations comply with the ever increasing regulatory and governance
unnecessary manual intervention and standardising the transactional process. Although the impact of new standards may well vary according to market segment, the imposition of increased volumes of regulation is sure to be a major driver in the future evolution and adoption of eFX and will create a need for additional technology. Already many technology vendors have noticed an increased
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demand for integrated tools that add compliance to the STP path and of course the added focus on control brought about by these regulations may provide treasurers with an ideal opportunity to justify and secure new budgets for investing in the technology to further automate their treasury and FX activities. The EU Markets in Financial Instruments Directive (MIFID) is due to be implemented in 2007. With its focus on increased rigour around client reporting and disclosure of fees and charges to clients, coupled with significant order handling requirements and
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obligations regarding pre and post trade information publication, the directive could have a significant impact on the Electronic FX environment. We plan to examine these issues in our next edition. A new regular feature we have included in this edition is the Product Spotlight. Let us know if you would like your innovative, new eFX products to be the focus of this article in the future. As usual we hope you enjoy this edition of the magazine.
Charles Jago Editor
Subscriptions hotline: +44 (0) 1225 868 948 Although every effort has been made to ensure the accuracy of the information contained in this publication the publishers can accept no liabilities for inaccuracies that may appear. The views expressed in this publication are not necessarily those of the publisher. The entire contents of e-Forex are protected by copyright and all rights are reserved.
Companies and organisations in this issue: A ABN AMRO Achelon Group ACI ACM Aegis Agricultural Bank of China Aspect Capital B Bank of America Barclays Capital Baxter Solutions BDRC Bertelsmann BGC Bloomberg BMO Nesbitt Burns BNP Paribas BOCOM Brown Brothers Harriman C Calyon Cantor Fitzerald Celent Communications Chicago Mercantile Exchange Chieron Trading China Construction Bank CITIC Citigroup City Practitioners CLS bank Cognotec CPSS-IOSCO Currenex D Danske Bank
page 34 page 111 page 22 Inside Front Cover page 85 page 14 page 124
page 9 page 10 page 17 page 36 page 84 page 60 page 61 page 74 page 39 page 14 page 43
page 6 page 59 page 58 page 111 page 113 page 14 page 14 page 6 page 30 page 22 page 7 page 22 page 57
inside Back Cover page 31
Deutsche Bank E EBS Ericsson ESCB/CESR eSignal eSpeed Eurex Eurobase
pages 4 & 5 page 64 page 22 page 117 page 59 Outside Back Cover page 12
F Federal Reserve FIX Protocol Org. FlexTrade FNX Forex Capital Markets ForexManage FXall FXDirectDealer
page 22 page 107 page 101 page 87 page 119 page 83 page 23 page 123
G GAIN Capital GFI GlobeOp Green River Computing Greenwich Associates
page 115 page 29 page 16 page 99 page 58
H Handelsbanken HotspotFX HSBC
page 81 page 13 page 56
I IFX Markets Integral Development Corp Interbank Group ISDA
page 33 page 15 page 113 page 22
J JH Financials JP Morgan Juniper Networks
page 113 page 6 page 98
L Lava Trading Lufthansa
page 60 page 84
M Merrill Lynch MIG Investments Misys
page 56 page 97 page 89
O Oasis Research Option Computers Oracle Orc Software
page 112 page 39 page 100 page 64
R Rabobank RBS Financial Markets Refco Capital Markets Reuters Riksbank Royal Swets and Zeitlinger
page 19 page 6 page 22 page 58 page 64 page 85
S Saxo Bank Saxon Trading SEB Merchant Bank Skandia Capital SmartTrade Societe Generale Standard Chartered Bank State Street Corporation Stentra StrategyRunner Sungard SuperDerivatives Swedbank Swiss Postfinance
pages 24 & 25 page 112 page 66 page 65 page 51 page 8 page 12 page 59 page 48 page 116 page 65 page 14 page 21 page 86
T 360T Textron TF Network Townsend Analytics TraderTools TradingScreen Traiana Tremont Capital TWIST
page 6 page 85 page 72 page 47 page 37 page 20 page 55 page 56 page 65
W Wachovia Wall Street Systems
page 11 page 93
X Xconnect Trading
january 2006 e-FOREX
Godfried De Vidts Focus on risk
Philippe Buhannic What's a customer?
Andrew Kidd Middle market e-FX
Peter Kriskinans Front & middle office
Michael Laven Tri-Party Credit Analysis
Harrell Smith Anonymous FX trading
Sebastian di Paola Sarbanes Oxley
Dr Anna Becker Automated Trading
Greg Michalowski Slippage
Christian Baudoin The e-Forex Interview
Foreword 22. This time we have been lucky! Godfried De Vidts looks at the lessons learned from the recent Refco case.
Features 26. Leader – What’s a customer? Electronic FX converging the Buy and Sell-side. Philippe Buhannic examines the new FX market structure and how the role of the buy and sell-sides will continue to blur further in the future. 30. Risky Business: Improving Risk Management strategies in the online FX environment. Paul Ronan considers some of the credit and market risks faced by banks in the rapidly developing online FX environment. 34. E-FX – on the way to meeting the needs of the middle market. Andy Kidd discusses how web technology is providing opportunities to deliver the services and functionality that the middle market segment needs. 38. eFX - Unifying the Front and Middle Office Environments. Peter Kriskinans outlines how unified streams of interactions and deals provide valuable information and how a unified approach benefits sell side banks. 44. Broadening client connectivity - improving backoffice processing. Nick Dyne identifies how the post FX trade environment still offers possibilities for exploiting the benefits of automation and technology. 48. Improving Customer flow quality: making best use of technology to monitor market making profitability. James Kemp takes a look at ways in which service providers can make best use of technology to monitor the quality of customer flow. 52. PRODUCT SPOTLIGHT The Mark to Market Monitor (MMM) from BAXTERSolutions Kft. 54. Extending Technology innovation to Tri-Party Credit Analysis. Michael Laven illustrates how automation of the credit analysis process has resulted in increased confidence from the large financial services institutions to expand their business 58. Privacy Please – the attraction of anonymous FX trading. Harrell Smith examines how the inflow of capital into the hedge fund community will lead to more firms exploring the use of trading platforms that offer anonymous execution. 62. Regional eFX Perspective: Scandinavia. Andy Webb looks at eFX within the region. 70. VIEWPOINT: Pulling in the reins - offering liquidity on a selective basis.
102. FORUM: e-FX Technology: powering the growth of new trading opportunities. With Misys, FNX, Townsend Analytics, Wall Street Systems and Cognotec. 110. Online Technology - a key differentiator for Trading arcades and prop shops. Heather McLean interviews industry players to see why Trading Arcades & Prop shops are growing in influence and how their trading models differ. 116. Automated trading solutions – FX trading of the future? Dr Anna Becker looks at the development of automated programs designed to maximize FX trading revenue and efficiencies, and the levels of customisation that are now available. Risk Management strategies
120. Traders WORKSHOP: Slippage Greg Michalowski talks about Slippage in FX trading and how to minimize its impact. 124. CASE STUDY: eFX technology – helping to minimise the problem of Slippage at Aspect Capital.
The e-Forex Roundtable 74. Squeezing efficiencies – where will the benefits of eFX be focused next? With Deutsche Bank, Bank of America, UBS, Brown Brothers Harriman and BMO Nesbitt Burns
FOCUS: Treasury Best Practice – the role of FX automation
Unifying Front & Middle office
80. Best execution - a fundamental part of best practice Keith Hill explains how best execution may have become a fundamental part of best practice in FX trading, but there is still considerable disagreement about how to define it. 84. e-FX and Best Practice in the Treasury environment. Heather McLean speaks to several leading international companies about the best practice advantages for their treasury departments of using eFX technology. 90. Automation in Treasury - facilitating compliance with Sarbanes-Oxley. Sebastian di Paola examines how automating FX trading can assist in meeting Sarbanes-Oxley compliance.
Customer flow quality
94. Why automation for IAS 139 is a must have - not a nice to have. Jiro Okochi identifies the key areas within hedge accounting that would benefit from automation. 98. CASE STUDY: How Juniper Networks turned its FX Hedging activity into a straight through process.
The e-Forex interview 127. With Christian Baudoin, global head of e-Forex at BNP Paribas.
Tri-Party Credit Analysis
january 2006 e-FOREX
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