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FX roundup: Why automation delivers, increasing FX analytics + TMS partnerships, more currencies

FX continues to be one of the most active areas of cash and treasury management. Deloitte’s 2017 Global Corporate Treasury Survey found that:

  • More than half of the 200-plus treasurers surveyed identified FX volatility as a top challenge due to current global political turmoil
  • Despite recognizing it as a top challenge, 75 percent of respondents say they are not actively managing key FX-related risks.

New facilities

Given the burning need for easy and cost-effective tools to manage FX risk and transactions, recent developments have included:

  • FiREapps suggesting that there are four ways to build a case for automated FX produces:
    • increased predictability of EPS and EBITDA
    • reduced hedging costs and an increase in productivity
    • enhanced controls
    • increases the value treasury professionals bring to an organization
  • Increasing partnerships between TMS solution providers and FX analytics providers such as FiREapps, Bloomberg, etc. 
  • Corporate usage of algo trading continues to expand: FXall, the electronic foreign exchange platform, launch of Execution Quality Analysis (EQA) reports, an advanced analysis tool which helps institutional traders to analyse their FX trading strategies and identify opportunities to improve performance. 
    • EQA offers insight into FX investment decisions and execution strategies and allows institutions to better understand how to achieve their best execution goals by reviewing results achieved using the multiple execution mechanisms and liquidity providers available on FXall. 
    • EQA reports provide a comprehensive summary of FX spot, forward, and swap trades executed on FXall during a specified time period, so that institutions can benchmark and evaluate their trading and execution performance.  
  • Aggregator technology usage is expanding: There is a debate as to  how to do it with Deutsche Bank saying that “Quality beats quantity in spot FX aggregation” and that the first decision for a trader is the number of liquidity providers and which to include and which to exclude. This is a big decision because once the technology has been set up and integrated into the corporate treasury department’s systems and processes, it is expensive and difficult to change.

More currencies

But that is not all, new currencies are being created: 

  • Local currencies are making a comeback in the UK: From Liverpool to east London (see)
  • There are now nearly 1,000 crypto-currencies.

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