Dmitry, please could you remind us about the range of e-FX solutions that Commerzbank now provides.
At Commerzbank, we continue to build on a strong legacy of eFX innovation. As one of the first banks to unify our voice and electronic offerings, we have made great strides over the past few years in improving our FX trading algos, to increase our competitive edge as a risk transfer liquidity provider as well as our client execution algos. We take a very hands-on approach with our clients, guiding them through the complex FX liquidity landscape. In addition to a comprehensive transaction cost analysis (TCA) that accompanies all our algo executions and resting orders, our quant desk is able to create bespoke, auto-generated reports delivered straight to our clients’ inboxes. The reports can be tailored to our clients’ specifications.They provide a regular update on market conditions and flow levels, by leveraging the vast reserves of data that we consume as an active market participant.
How do clients access these toolsets?
We offer our liquidity, orders and algos on all key multidealer venues. However, FX Live Trader, our in-house developed trading portal, remains the central platform for accessing our offering along with the accompanying research and market insights. This is now supported for mobile phones and tablets, making it easier than ever to access our suite of FX services.
In what ways have you been working to enhance your e-FX offerings?
We see technology as one of our key competitive strengths. It has allowed us to build a strong electronic FX spot offering over the last couple of decades. We are now using our indepth expertise to extend this model to other asset classes and product types. By establishing a standalone global e-forwards desk a couple of years ago, we were able to increase our internalisation rates in FX swaps by deploying new pricing algos that automatically adjust the prices we show our clients, either via executable streaming prices (ESP) or request for quote (RFQ) / request for stream (RFS) to incorporate our axe. Much like for trading spot, this enables our clients to reduce their market footprint when transacting swaps or forwards with us, and allows us to offer very competitive pricing. The ecosystem for electronically traded swaps is still in its infancy compared to spot, but we are working closely with several partner platforms and data vendors to help facilitate growth in this area. We hope this in turn will bring greater transparency to the market. Likewise, we have moved non-deliverable forwards (NDF) and precious metals trading onto the electronic platform for similar reasons.
How has Commerzbank responded to increasing demand for FX execution algos?
As an active consumer of liquidity ourselves, we understand the challenges faced by clients in trying to efficiently navigate such a fragmented market. Our execution and smart order routing (SOR) algos were designed with these challenges in mind. We take time to understand our clients’ trading requirements and do our best to match them with the right tools, which we have at our disposal. We have also stepped up efforts to make our FX execution algos more adaptive to changing market conditions. One example of this is the introduction of an in house developed trading signal, called ‘IntelliVol’, that makes in-flight adjustments to the execution trajectory of the order depending on changing levels of activity in the market.
Has the current Covid-19 crisis strengthened the value proposition of e-FX even more amongst your clients?
Definitely. By streamlining our product lines along electronic workflows and channels, we were in a prime position to offer our clients transparency for their FX liquidity and execution needs, at a time when many had to perform their roles outside of the office. We were also able to remain competitive when there was significant market dislocation. An example of this was during the turbulent trading conditions in March last year when, at times, the market FX swap spreads blew out to 20-30 times what they normally are. Our investment in establishing our e-forwards desk has played an instrumental role. It enabled us to continue to show tight pricing to our clients, who were trading forwards and swaps. While increasing our market share, we were also able to pass on our improved efficiencies in the form of significant cost savings to our clients.
What are your plans for rolling out new e-FX products and functionality over the coming months?
As I mentioned earlier, technology forms the backbone of our operation at Commerzbank. Our clients are already able to benefit from our capabilities either through competitive liquidity provision or efficient algo execution. But we don’t plan to stop there. We are now exploring more direct ways in which we can empower our clients to utilise some of our core system components to help them build out their own eFX capabilities. Whether it is execution, liquidity provision, inventory management or analytics, we stand ready to partner with interested clients and help them build up a streamlined electronic business of their own. If this resonates with any readers, please feel free to We see technology as one of our key competitive strengths reach out to discuss further. Thank you