As e-FX becomes increasingly competitive how is Standard Chartered aiming to differentiate its e-commerce services from other leading players?
First and foremost is our expertise in emerging markets across Asia, Africa and the Middle East. Secondly, based upon our market leading Straight2Bank transaction banking platform, which has been around for a number of years, we have developed our Straight2Bank exchange - S2BX - financial markets platform. Straight2Bank delivers products, clearing and payment services to a wide range of clients from local corporates to international financial institutions. We decided to integrate S2BX with our transaction banking and consumer banking site, so in the future our clients will be able to utilise our payments, settlement, rates, forex, commodities and other assets capabilities under one roof. The concept is ”One Bank” : a highly competitive, seamless platform that spans wholesale and consumer banking.
Lastly, in line with Standard Chartered’s geographical footprint, S2BX is aimed at linking emerging markets with developed ones; linking West to East. This is a very powerful offering in the current global economy.
What steps has Standard Chartered been taking this year to further strengthen your very strong global FX franchise and enhance your range of FX e-commerce services?
We continue to invest in our infrastructure and to strengthen our franchise across our footprint. Our local presence gives us a unique viewpoint on what are some of the most exciting and fast growing markets and we are committed to rolling out new services to our clients. Our aim is to provide customised services across our footprint which will continue to distinguish us, and focusing on rolling out S2BX.
Has Standard Chartered made any significant changes to enrich the features and functionality of your FX trading platform?
The process is an on-going one. We started to work on S2BX only three years ago and given the size and diversity of our footprint and the complexity of some of the geographical and financial markets we work in, we are constantly adding new functionality. We have been pushing out S2BX internally for about two years, introducing it to our clients externally for about a year, quoting over an API to ECNs. We have been using our own single-bank GUI for about six months.
In what ways has the wide global footprint of Standard Chartered and deep insight into emerging markets helped you to develop your e-FX services?
We have deep local market expertise across all functions. This knowledge is invaluable when developing solutions for local clients whether it is in pricing, execution, regulation, documentation or other areas. We are already able to offer 5,000 currency combinations and we are live in over 130 separate currencies. We are locally distributing FX, forward and FX swap capability in most of our footprint countries across Asia, Africa and the Middle East. We have a very sophisticated order management framework.
We developed S2BX from the ground up for emerging markets currencies, emerging markets regulation, emerging markets pricing and execution. To do that you have to think about each of the countries as if you are in that local country and ask, “What am I trying to deliver to my client?”
The answer is that you have to provide onshore pricing and execution but you have also got to manage the onshore regulatory framework and the regulatory experience that both our clients and our local operations are managed under. We have taken the time to extensively seek feedback from our clients on what they require. In the case of pricing, for example, we seek input from local brokers and then align all of the related execution ticketing, returns and recording in conformity with local requirements.
Moreover we have a front end that can work in the lowest of bandwidth environments which we have tested in 12 African countries. This allows us to deliver client-rich information to more or less any desktop which has required some pretty sophisticated engineering across our technology.
What preparations has Standard Chartered been making to help clients address the impact of new regulation on FX market activities?
Standard Chartered has been engaging with regulators to understand how various proposed regulations will impact the real economy and at the same time we are active in a number of established forums to consider how best the industry should respond to these new challenges. Despite these interactions, the direct impact to our clients remains uncertain. The FX product set seems to have the least clarity and reflects the degree to which the industry and regulators recognise the need for ongoing access to these markets, in particular corporates across emerging markets.
We also continue to engage with clients on the evolving regulations, to communicate how the bank views both the impact and timeline of the various proposals. The critical consideration for our clients remains the cost of doing business in the new market environment and how best to manage their businesses under these new regulations.
In the short term Standard Chartered expects to extend a number of services to clients to enable continued access to products and geographies. These services are likely to concentrate on how best to provide access to liquidity, utilise available assets for any required margin or collateral arrangements and meet any clearing requirements relevant for FX products.
Why has offshore Renminbi trading become so popular and how has Standard Chartered been facilitating the electronic trading of CNH?
The increasing move towards internationalisation of the Yuan is an event of major ongoing global economic significance. One of the key drivers of this trend is international trade. The total volume of RMB trade settled transactions with China through Q1 2012 was CNY 580 billion or 10.7% of total China trade – up from less than 2% for the same period in 2010. This upward movement is borne out across all of China’s key Asian trading partners - Singapore, Taiwan, South Korea as well as Australia. Forward projections indicate that the overall figure for RMB settled trade transactions could reach 20-30% by 2015. The creation of additional offshore clearing hubs and agreements will serve to drive and underline this trend. BoC Taipei has been approved to clear offshore Yuan transactions, HKMA and UK treasury co-operation continues to target greater offshore CNH business activity, and Singapore has recently issued full banking licenses to 2 Chinese lenders in a move that is widely seen to be a precursor to establishment of a local RMB clearing bank.
Beyond trade settlement, broader drivers of offshore CNY activity include FX hedging, dim sum bond issuance, and loans. Added to this, portfolio utilisation opportunities for CNH have also seen a boost across 2012, specifically with an increase in the RQFII quota to USD$32 billion in November.
The cornerstone of Standard Chartered’s eCommerce offering is a partnership model – combining our presence in core markets and our unique pricing capabilities to offer a deeply tailored ‘e’ offering to our client base. Within this is absolute support for realtime liquidity and execution for all CNY variants – onshore, offshore, as well as the non deliverable offshore variant. Our eCommerce platform, driven by the need to operate in regulated as well as unregulated markets, has a highly sophisticated and flexible permission model that serves to clearly regulate which portion of our client base gains access to which currency set, onshore versus offshore. Equally critical is support for major onshore liquidity venues, and our provision of pricing to CFETs serves to highlight this.
The deployment of our platform to trading teams and clients in all relevant onshore as well as offshore liquidity centres means that trends in the globalisation of the RMB, and the impact of these trends on the 3 currency variants will be reflected in realtime on the platform, and be made available to our client base on a global basis.
Many commentators believe e-FX is evolving away from just a transactional process towards helping clients to extract more value from risk, research and advisory services. In what ways do you think Standard Chartered is strategically placed to benefit from this trend?
Transactional FX in isolation meets only one facet of our client requirements. The key to creating highly relevant content, and deep long term relationships, is understanding the client profile and how that drives client behaviour. Comparing a trade backed transaction banking client with a retail consumer, a high net worth individual, or a treasury centre user, will yield very different results in terms of their drivers and modes for FX execution – as well as what their overall pre- and post-trade requirements are.
Ensuring that these diverse client sets are fully catered for has been a design principle of our eCommerce strategy from day one. Our platform offers a number of execution models depending on client profile. On the one hand, we are heavily integrated with the bank’s consumer banking, payments, trade and custody systems to ensure that clients see executable FX as part of an offering tailored uniquely for them. As alternatives to this, we also have a Single Dealer entry point for execution, as well as complete support for automated execution on ECNs or sophisticated FX consumers such as hedge funds.
Investment towards value added, non transactional, functionality is a key area of ongoing focus for us. As an example of how we have been leveraging technology as part of our overall ‘e’ offering, Standard Chartered Global Research now also offers research content via an iPad app. The recently launched market-leading Renminbi Globalisation Index is now available via this app. Added to this, our platform already supports sophisticated client MIS – all of which is used in direct support of tailored reporting and pricing. Development of support for full cross border mobile remittances is also on the roadmap and user base projections are at 1.1 billion users by 2015.
The key to an integrated offering is a well understood and globally diverse client base, the deep internal verticals to service them, and a ‘One Bank’ view of channels that sit across these verticals to offer highly tailored functionality. eFX plays a pivotal role as a platform in its own right, as well as a provider of critical real-time execution services into bank-wide platforms. It is a compelling combination of best of breed functionality being leveraged across a solid global client franchise.
Looking ahead what parts of the world do you expect to see increased demand for e-FX coming from over the next few years and how is Standard Chartered gearing up to meet that?
Emerging markets sit right within the bank’s footprint and will continue to be a key focus. We expect to see increased trade activity from China and Africa in particular. With strong growth expected across our footprint, we expect to continue our focus on developing S2BX for these markets. We will use our local expertise, working closely with our clients to provide them with the most comprehensive integrated e-offering.