The Association of Corporate Treasurers Annual Conference in Manchester this week reflected what is happening in the FX market. Driven by rising costs and regulatory pressures banks are ‘exiting’ the low value/SME end of market and at same time are developing new advanced integrated FX and hedging services.
SME FX market
Most of the cash management banks still provide FX services to the SMEs but this is via an FX platform to keep the costs down. Also many no longer provide hedging and FX advice, e.g. SME at ACT conference had not received any visit from their bank to advise them on their FX and hedging strategies for over two years. This has created a vacuum into which many different suppliers have moved into. There were two exhibiting Currencies Direct and Money Corp who show what is happening. Both companies claim to offer much cheaper FX to SMEs mainly because they have considerable buying power as they also cover the consumer market as well. Both moving into offering FX derivatives as well.
Currencies Direct who used to focus on SMEs carrying out £2-10m FX/year, are now extending their market focus to SMEs with FX turnover of up to £100m, as they change emphais to helping SMEs to reduce their FX risk through a pragmatic use of options and swaps, rather than just providing spot FX services. CD also provide a daily newsheet on the turbulent FX market.
Money Corp, a major player in the comsumer FX market, are moving into the corporate market too. They are able to offer lower prices than the banks by using their panel of 12 banks (soon to be 14) to get the best price for their SME clients. They too have a product suite that now includes currency options and full assessment of the SMEs risk profile, as well as their global payments platform.
Citi FX automated hedging platform
Citi presented their new automated hedging platform FXGateway in the ‘Automating corporate risk management - the road to seamless strategic hedging’ session. (FXGateway is part of their CitiFX PULSE which provides unparalleled real-time market access to FX spot, forward, NDF and swap pricing in over 400 currency pairs, 24 hours a day The service brings all the different pieces in currency hedging and risk management together, for example:
- GE have over 50 ERP tools which are not conncted directly to the risk management tools and operations in 170 countries with very different currency needs, so bringing everything together is tricky. They simplified their hedging operations by creating a central foreign exchange hedging entity, introducing a single source of trade requests and by deploying Citi’s technology to carryout auto execution and booking
- Mondelez manages the currency risk for 84 markets centrally and now is able to process 90% of their FX through one of four automated platforms. Three operation centers — in Manila, Bratislava and Costa Rica — run the foreign currency and risk management process through one centralised platform.
Citi developed APIs to automate the links between their systems and the corporate’s, to be able to offer an automated execution platform that links to agreed performance criteria and/or benchmarks, so freeing up the corporate treasury department to focus on changes to the strategy rather than implementing the strategy.
FX Risk Management in a New Era of Volatility
New AFP Executive Guide examines factors that affect treasury practitioner’s ability to identify and manage foreign exchange risk, and the key stages required in setting and implementing a FX risk management policy
FX global code of conduct to promote standards and efficiency
The Bank for International Settlements has published the first phase of the global code of conduct for global FX markets, aimed at raising standards and promoting fairness and efficiency in currency markets.
Citi’s e-banking platform given top ranking for 10th consecutive year by Greenwich
Not only this, CitiDirect BE received the highest rating in the study in 22 categories