INTRODUCTION

Our client, one of the largest commercial banks in Germany, needed to optimize their FX trades dealership capabilities delivered to the pool of their institutional, typically non-financial clients.

Even though the sell-side services were being actively provided, the process was rigid and consisted of many manual steps prone to several types of operational risk. Every time the bank’s customers entered an FX position against the bank, they needed to make a phone call and supply the parameters of the trade, while the bank’s representative verified the eligibility of the transaction before providing the final quote to the customer. As this process was lengthy, the customer was exposed to unnecessary slippage risk that the FX rates would change before the quote is received. Also, there was a risk that customers won’t be able to reach the bank’s dealers at peak times or holidays.

The bank was also significantly limited by the capacity of their dealing team, with minimal prospects of expanding. Finally, the operational aspects of the bank’s processes were often questioned by the risk policies imposed and monitored by the risk management functions and internal audit.

As a result, the steering committee selected Refinitiv, a subsidiary of the London Stock Exchange Group, as the provider of the IT solution and Capco as the main partner for the integration of the platform to the current MX.3 ecosystem.

WHY NOW?

There were a number of reasons why our client aspired to increase the efficiency of their FX dealing functions. With the steadily increasing pressure on the quality of operational processes, streamlined by the upcoming Basel III framework, it was in the client’s interest to lower the implied risks. The ultimate aim was to lower the potential unexpected losses, thus reducing the necessary capital requirements and associated costs.

In addition, the prospect of expanding the FX business played a significant role in the decision. The bank could no longer timely and effectively support all trade requests from their customers and had only limited possibilities when it came to offering of new products (e.g. foreign exchange time options).

HOW WE DID IT

• The first task was to collect clear functional requirements from the client and to set a definition of the goal of the project validated by the important stakeholders.
• Thorough project governance was established. Capco was represented by a project manager, java developer and Murex developer, while the client retained the requirements ownership in the project.
• The cooperation consisted of key elements of agile project management and appropriate tooling as the nature of the project required.
• Capco established a viable cooperation with the vendor of the FX platform, including regular follow-up meetings and onsite visits to overcome technical difficulties along the way.
• The project team developed a target process scheme, displaying the integration of the Refinitiv platform into MX.3 environment, using effective real-time communication channels.
• The project timeline was set with multiple IT development stages and subsequently successfully released while the scope of the project had been repeatedly extended as demanded by the customer.

WHAT WE DELIVERED

• With Capco’s support, the client successfully introduced the necessary automation to their FX dealership business, with the expected scope and quality.
• The final delivery significantly freed the capacity of the FX dealers while enabling the expansion of their services.
• The solution is expected to reduce the cost of the current business model while boosting revenues from the larger customer base and higher trading volumes.
• The target model consists of the core java program, real-time message exchange protocols, automatic credit checks of customer funds, xml transformation routines and trades import to MX.3.
• New product classes are now being offered via the platform, notably time options and block orders, including the automatic event handling (drawdowns and unwinds).
• Capco also helped with the automation of the internal hedging for the trades and trades packages coming from the platform.