There are a number of problems and inefficiencies associated with the traditional hedging process. How does Nordea’s new Auto FX hedging tool help to resolve these?
FX trading has for a long time been a field where everything is digital, but still manual. Typically there are people who manually calculate their FX exposure, compare it to open FX trades, aggregate data in giant Excel spreadsheet, trying to figure out what FX trades are needed. It is changing now. AutoFX Hedging will take care of this manual number crunching. Corporate controllers don’t need to calculate everything manually. Still, they can keep the control and make sure FX trading is in line with their strategic goals and risk management policy. Actually, this will be even easier now when they don’t need to use their time on performing all the calculations manually.
What types of clients are you targeting with this solution?
Any corporate who is either hedging their FX risk systematically or would like to do that if it just was easy enough. Based on the feedback from these types of companies it looks like the majority of them can greatly benefit from AutoFX Hedging.
How does your new tool actually work in practice?
First, User tells the platform the hedging principles they want to follow, e.g. that they want to hedge 100% of their order book, or that they want to hedge their cash-flow forecast with a gradually declining hedge ratio. Then they only fetch their business data - order book or cash-flow forecasts - to the platform. The data can be automatically retrieved from the customer’s order system - or by manually uploading in Excel file. The platform compares the business data and the customer’s open FX trades to see which trades would be required to meet the goals of their hedging policy. The customer can visually verify that everything looks correct, before executing the trades with one click.
What are the key benefits of Auto FX hedging?
Businesses can save a lot of time - and hedge their FX risk more systematically. Currently, the process described above takes a lot of time in many companies when done without AutoFX Hedging.
They can also avoid unnecessary mistakes by automating the manual tasks. Therefore, they can focus on the more strategic questions around the hedging. They can also more easily control and document the hedging process - every step of the process is now documented on one platform.
How can your new solution assist those companies with more advanced hedging requirements?
The platform offers quite a versatile set of possibilities for adjusting hedging policy. You can freely choose the hedge ratio and whether you want to consolidate and net your cash flows before hedging the risk and so on. We are also improving it all the time, based on the wishes we get from our customers.
How can firms access your new Auto FX Hedging tool and how does it fit into Nordea’s digital FX product set?
It is a modern cloud platform that is easily accessible via a web browser. After an introduction meeting we can onboard customer within hours. We can also help them to find the most optimal way to benefit from the platform. The solution is a very natural addition to our product offering. Earlier we have already automated liquidity management for many customers, so streamlining FX hedging is a natural next step.
The solution is available in Sweden, Denmark and Norway.