Standard Bank's Five-Pronged Technological Interface Reduces Clients’ Foreign Exchange Risk

Rapid changes in the world of technology have given rise to platforms that facilitate access to liquidity through advanced electronic trade execution. According to Standard Bank, Africa’s biggest lender by assets and earnings, this has dramatically altered the way in which traders achieve more standardised foreign exchange prices as fast as possible.

The global foreign exchange market has grown from approximately $3 trillion in average global trading per day five years ago, to approximately $5 trillion in daily trade today.

Standard Bank has implemented a five-pronged technological interface to equip itself to manage and reduce clients’ risk in the ever-fluctuating foreign exchange market.

“It’s imperative to have a deep understanding of the inherent risk around our clients’ businesses as well as what they need to mitigate risks,” said Richard de Roos, Head of Foreign Exchange at Standard Bank. “The best way to achieve that is through participation in all levels of the foreign exchange value chain.”

Electronic offerings need to be integrated into trade flows; settlement of imports and exports and how clients want to receive their currency conversion, which is usually the ultimate process in an exchange of goods or services. In Africa, some of the core capability of technologies that relate to market depth, speed of execution, liquidity and electronic delivery are continually developing.

Standard Bank’s eMarketTrader, a cross-asset electronic trading platform, brings together market intelligence and research, real-time pricing, trade execution and post-trade services through a single web-based platform.

The system allows foreign exchange rates for 64 currencies and is integrated into Standard Bank’s five-pronged approach to managing risk that includes system aggregation; algorithmic risk management tools; client value analysers; a rates engine and price adaptation facility to reduce client risk in the market.

“Our standing as a truly global African bank with a large footprint across the continent allows us to integrate international best practice into our technological platforms and to adapt them for the needs of the African market,” said de Roos. “Allowing transparent price discovery that is reflective of the underlying market and the efficiency of electronic trading on a single dealer platform coupled with our in-country solutions across the continent make for the best client interaction with the market.”

The idea behind the system is to serve every client segment from large buy side institutions to small corporate clients with trade flow financing and foreign exchange needs.

At the other end of the spectrum are individuals who, due to the rapid growth of e-commerce platforms such as Amazon.com, iTunes and eBay, have made consumers an increasingly powerful force in the foreign exchange market.

“The consumer is becoming an increasingly important player in the technological age,” de Roos said. “Success in African currency remains being able to access liquidity without impacting the market and single dealer platforms are the ideal infrastructure to facilitate this.”

Platforms need to be dynamic enough to accommodate changing regulatory landscapes across the continent, navigate the lack of liquidity in certain markets, as well as being relevant for the typical behaviour of participants in a particular market.

Such systems also need to enhance the operational efficiency within a client’s organisation by adapting to the manner in which they execute their foreign exchange transactions.

“In Africa, clients value quality service above all else,” concluded de Roos. “This is where Standard Bank’s reach and depth of service in the continent’s foreign exchange market can really make a difference to their business.”