11.17.2014
By Terry Flanagan

Regional Banks Get FX Pricing Technology

EBS, the FX trading division of interdealer broker Icap, is making inroads with regional banks, a segment that’s ripe for electronic dealing platforms. The company has signed up 15 regional banks for its EBS Liquidity Optimization suite, which provides tools that manage pricing and risk.

“Our focus is on the needs of regional banks,” Justyn Trenner, head of EBS Liquidity Optimization, told Markets Media.” Regional banks have a challenge that they first of all need to price FX in fast moving markets. Large banks have spent very large sums to create pricing tools. EBS is able to provide intelligent pricing algorithms which price for the risk of short term future moves in the market. The result is that allows regional banks to make prices effectively in challenging markets, efficiently and profitably.”

One of the banks, BayernLB, has been able to redesign its pricing and risk management models, and has experienced a significant increase in both average daily volumes and profitability since it went live a year ago.

Justyn Trenner, EBS

Justyn Trenner, EBS

“We’ve also benefited from increased control, which has led to improved risk management and better service for our clients,” Marc Burgheim, global head of FX at BayernLB, said in a statement. “Coupled with the EBS Direct solution, we’ve been able to price and execute in a powerful and highly competitive environment that has benefited our business greatly.”

Regional bank customers need price-making tools at reduced cost to allow them to retain and grow their client franchise. “We provide sophisticated algorithms, technology and analytical tools that allow regional banks more flexibility and control, ensuring profitability in the prices they make and the risk they manage,” Trenner said.

The reporting tools “allow banks to understand the values of flow they receive and indeed which customers are genuinely yielding them good value,” he added.

EBS Liquidity Optimization provides two pricing algorithms: a continuous pricing algorithm for fast moving, liquid markets, and a discontinuous pricing algorithm make streaming pricing available to customers in emerging markets.

“EBS Optimization is providing work flow tools to banks that allow them to price, report, analyze and risk manage their customer flow much more effectively,” said Trenner.

Trenner’s company, ClientKnowledge, a provider of FX consulting to banks, was acquired by EBS in 2012. “EBS had until 2012 been a single product business focused on what we now call EBS Market, which is a central limit order book for spot foreign exchange,” he said. “We recognized that we needed to review our business strategy, become a multi-product company and provide relationship liquidity, point to point liquidity and related workflow tools.”

All 15 banks are either new customers to EBS, or “are customers for whom we were of marginal significance but are now are once again important to them,” said Trenner. “One of the new customers has been using the algorithms, albeit installed as opposed to hosted, because everything that EBS provides is software as a service. But they have using our algorithms in production since 2010.”

The larger banks have often invested very large amounts of money into these tools, noted Trenner.

“It requires scale to develop these tools effectively,” he said. “We have that scale, we can provide those tools economically at low to nil cost to regional banks precisely because we can provide them to a wide range of banks. Within a year of doing live, we’ve already got fifteen banks lined up and being on board. That shows our power to scale out, and the acceptance of our tools.”

Featured image via Dollar Photo Club

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