Just as the cavalry supposedly turned up in the nick of time to save the day, so new technology has arrived to accelerate overdue transformation processes across a spectrum of financial services just as customers grow restless. The FX market is no exception; seamless, end-to-end trading efficiency that extends from front end execution to back office processing has long been the ideal sought by market participants.

The next generation workflow systems introduced in recent times, accompanied by the adoption of application programming interfaces (APIs) and the widespread use of connectivity standards, mean that this goal can now be achieved while real-time cross border FX payments become a realistic target.

“Historically, the FX market put the onus on clients to work out precisely what their needs were beforehand before they came to the market with a specific trade to be executed,” says David Leigh, global head of FX spot and electronic trading at Deutsche Bank.

“More recently, the trend has been for the FX market to move closer to the client’s needs and respond better to their particular workflows and the nature of trades requiring execution. This has seen DB’s efficiencies focused on working out the most suitable hedge and how the FX risk can best be netted.” The change reflects, in part, the steady increase in the volume of cross-border transactions.

Leigh will outline the advances in direct connectivity between platforms and FX risk managers at Sibos 2019 in September, as the keynote speaker for a day one afternoon presentation titled “How asset managers, corporates and their servicing banks are changing FX workflows to prepare for the next digital age.”

"Institutional clients have operational overheads and other costs involved in FX; for example, those relating to their investments in various countries and the currency hedges that are regularly needed"
David Leigh, Head of E-FX Deutsche Bank Corporate Bank

The session will examine how the newest workflow solutions further integrate buy side FX execution and treasury systems to their servicing banks. As the preview notes, “end to end, an FX workflow can involve many independent technology systems, so the opportunity to deliver a single end-to-end workflow solution is huge.”

The 2019 event comes as both institutional and corporate clients are stepping up their investment in these solutions. Corporates are keen to eliminate manual processes through automation and many of their treasury departments are seeking to centralise their FX decision making, while the institutional side is focused on maximising efficiencies in the FX market through automating its more basic operational tasks. As flow noted in ‘Hedge with an edge’, “By digitising and automating workflows, treasurers will not only achieve operational efficiency, but will also be able to access and build better, timelier data that in turn will enhance trend analysis and the understanding of the drivers of exposures, as well as enable more accurate forecasting.”

Tech innovation and improved connectivity make it possible for FX pricing and transactions to be embedded directly within client workflows. In this way, simple processes from making payments to settling invoices, to complex balance sheet management, and cross-border regulatory compliance can all have embedded FX capabilities.

“Thanks to developments in technology these can now be captured in their system, which can then ‘talk’ to DB’s system and enable the optimal hedge to be devised. This allows time to be freed up for more valuable work while also creating an audit trail.”

One notable trend is the growing number of clients bringing their FX transactions in-house and no longer sending out dollars or euros to various points around the globe. “Deutsche Bank can carry out the currency conversion on their behalf and settle locally,” explains Leigh. “The efficiency savings are considerable particularly where, say, the client is active in 20 different locations.

He adds, “A further use case that we’re now seeing more of is the ability to plug tradeable FX risks into systems for execution. This enables an internal rate to be captured that will be the same as the post-execution rate and removes the need for a series of reconciliations.”

The Sibos session, which is targeted at representatives from both the corporate sector and the fintech community will dig deeper into these developments. It will also assess the likely further development of workflow technologies as the tech revolution continues to open up new possibilities. The revolution is still in progress.

David Leigh is speaking 15.15 to 16:00 on 23 September at Sibos London 2019, which takes place at the ExCel Centre