De nieuwe Europese wetgeving voor crowdfundingdienstverleners treedt op 10 november 2021 in werking. Vanaf deze datum kunnen crowdfundingdienstverleners een vergunning aanvragen bij de Autoriteit Financiële Markten (AFM). Zonder deze vergunning kan de dienstverlening vanaf november 2022 niet worden voortgezet.
Vanaf 1 november 2021 kunnen aanbieders via een digitaal portaal van de AFM een aanvraag indienen voor een crowdfundingvergunning. De AFM gaat vergunningen verlenen voor zogeheten loan-based en equity-based crowdfundplatformen.
Enigma Consulting heeft ruime ervaring met vergunningaanvraag trajecten. Zo hebben wij onder andere betaaldienstverleners, cryptodienstverleners, elektronische geldinstellingen, aanbieders van online kansspelen en crowdfundingdienstverleners geholpen bij het verkrijgen van een vergunning of ontheffing.
Momenteel zijn de vergunningsvereisten die voor de omschreven aanbieders van crowdfundingdiensten gaan gelden nog niet volledig uitgewerkt door de Europese toezichthouder en de AFM. Wel zijn op basis van de gepubliceerde verordening de geldende voorwaarden en vereisten op hoofdlijnen al duidelijk.
Hierbij kunt u onder andere denken aan:
- Het opzetten van een beheerste governance structuur en organisatie inrichting
- Procedures en processen om de organisatorische en operationele vereisten om een beheerste en prudente bedrijfsuitvoering te waarborgen, waaronder o.a.:
- Een scheiding van verantwoordelijkheden binnen de onderneming;
- Het waarborgen van de bedrijfscontinuïteit;
- Het voorkomen van belangenconflicten.
- Het garanderen van een integere organisatie waarin de klantbehoefte centraal staat
- Het opstellen van processen om klanten te identificeren, te monitoren en indien nodig, te rapporteren
Enigma Consulting heeft uitgebreide kennis en ervaring met het inrichten en vastleggen van een gedegen en compliant bedrijfsvoering.
It’s free, It’s Virtual…
International Treasury Management is the annual meeting place for 1000s of the World’s most senior treasurers to learn and share experiences in valuable peer to peer discussions. With a reputation for ground-breaking sessions and world-class speakers, our 30th anniversary event will explore the boundaries of the profession, take a glimpse into the future of business, treasury and working life as well as offer the practical case studies on the treasurer’s top agenda items.
Only one treasury event can deliver the comprehensive mix of big picture global insight and granular treasury knowledge you need to make the right choices for the future.
Over the past 30 years since EuroFinance’s inaugural conference on International Cash and Treasury Management, much has changed. Treasurers have firmly become business partners, technology experts, risk managers and opportunity spotters. They often lead fundamental change within the company as markets, business models and technology shifts.
What next? This event will delve into how treasury operations can gear up for the future, having learned the lessons from the past. Where, who, what and how will the corporate be in the coming years and what is treasury’s role?
Keynote sessions will offer big-picture insight alongside themed streams including:
- Payments revisited
- Risks and Rewards
- Digital strategies
- Practical solutions to day-to-day Treasury challenges
- The power of partnership
What makes International Treasury Management the must-attend event of the year?
- networking on a global scale – a significant rise in attendees in 2020 boosted the value networking with banks, providers and potential clients… all in one place
- strategic insights and best practices – get solutions to the challenges you face from treasury and economic experts during keynotes, practical case studies, fireside chats, analytical panels and more
- future trends – delve into the latest innovations and new technology driving change in treasury, and their practical applications
- live Q&A with world-class treasurers – enjoy borderless networking and live Q&As with high-profile speakers directly after each session
- cost and time-efficiency – tune in form anywhere in the world, at the click of a button with no long distance travel or accommodation costs
- continued learning – catch up on any missed sessions and re-watch your highlights, on demand for up 2 months after the event
- unite your international teams – as a free event, it offers an opportunity for your whole treasury team to attend. Perfect for encouraging learning and development at all levels
September 27th – October 1st | Virtual
To say that the COVID-19 pandemic changed the way treasury departments and companies operate is a massive understatement. Treasury, a function already accustomed to ‘doing more with less,’ began operating remotely—often with a skeleton crew as companies were forced to reduce headcount.
Once mass distribution of the COVID-19 vaccine began, companies quickly began to strategise over what their post-pandemic workforce might look like. While the rise of the Delta variant has thrown a wrench into many organisations’ plans to reopen, eventually, that new work model will take shape. And it might look drastically different than what has come before.
Here are a few things to consider.
A hybrid work environment will very likely be the new normal.
Research from Harvard Business Review found that 70 percent of companies—including giants like Google, Citi and HSBC—are moving to a hybrid model. Just as treasury teams needed to adapt quickly to operating from home, now they’ll have to adjust to having some team members in the office while others are remote.
CFOs have an eye on emerging technologies.
The remote working environment brought on by the pandemic prompted, or perhaps forced, many organisations to digitise their processes. In a hybrid work environment (that could revert back to a fully remote one if COVID-19 variants continue to emerge), finance chiefs will continue to call for better technological solutions. New research from Gartner found that 82 percent of CFOs plan to increase investments in digital capabilities. CFOs named artificial intelligence (AI) as the technology that they expect to have the most impact over the next three years. Kyriba users can apply AI and machine learning (ML) to key cash management tasks like reconciling prior day bank files with their expected cash positions. For organisations that process high volumes of transactions, handling this process manually can take hours. Kyriba’s solution can identify and resolve discrepancies in minutes, and it learns from the data so that eventually, little to no human interaction is required.
Treasury’s role expanded considerably throughout the COVID-19 crisis.
More than 80 percent of treasury professionals said that greater value was assigned to treasury during the pandemic, according to the 2020 AFP Strategic Role of Treasury Survey. Furthermore, nearly 70 percent of respondents believe that treasury’s role will continue to be of greater significance. To maintain that influence over other, other departments, treasury professionals may need to revisit their soft skills. Just as employees may have faced difficulty giving presentations over Zoom, they may also find presenting in-person or to a mix of in-person and remote employees to be equally challenging.
Regional treasury centers might no longer need to be regional.
While it can be convenient to house a treasury center to manage cash and FX hedging in a region with unique regulations, the COVID-19 pandemic may prompt organisations to rethink that approach. Since the onset of the pandemic, those remote working has surged; the Stanford Institute for Economic Policy Research found that 42 percent of the U.S. labor force currently works from home. And perhaps more importantly, it’s been incredibly successful for both employers and workers, according to PwC’s U.S. Remote Work Survey. Ultimately, this could mean that treasury teams may no longer see a need to centralise their operations regionally even after the pandemic ends.
Continuous remote work means fraud threats will remain elevated.
According to the 2021 AFP Payments Fraud and Control Survey, business email compromise (BEC) scams increased last year. This was likely due to the remote work environment making it more difficult to verify emails with colleagues. Security will continue to be paramount for treasury, particularly if it moves to a permanent model where some employees regularly work from home. Treasury teams will need to continue to use strong controls like multifactor authentication, single sign-on and virtual private networks to ensure that only the appropriate people have access to their systems. Additionally, treasury employees must be even more meticulous about setting approvals for payments so that fraud attempts will be thwarted. With Kyriba Payment Fraud Detection, treasury can stop fraud in real-time. Users can set pre-defined detection rules, to screen for suspicious transactions. Additionally, ML algorithms can identify and quarantine dubious payments for further review.
The cloud provides a failsafe for business continuity planning (BCP).
Cloud-based treasury management systems aren’t only efficient modules to help treasury teams track cash and liquidity. They are also a key cog in BCP. Cloud-based solutions like Kyriba’s are hosted offsite in multiple locations, allowing your treasury department to function regardless of whether your team is working in the office or from a dozen different locations. So even if a new COVID-19 variant emerges, treasury teams can continue to function without interruption.
Making a Game Plan
While it’s unclear how soon offices will begin opening back up en masse, now is the time for treasury teams to begin planning for the shift. When the pandemic first hit, treasury functions had to respond quickly, and they did as best they could. Pivoting in this next phase won’t be seamless, but with the right protocols and technology in place, treasury teams can make smooth transitions.
Imagine a perfectly designed currency hedging program for a company that seeks to protect its annual budget. Given the specific features of that company —especially its pricing dynamics— such a program would allow the finance team to systematically achieve a hedge rate that would be equal or better than the FX budget rate, avoiding overhedging all the while. The hedging strategy would also consider the firm’s degree of forecast accuracy, as well as the forward discount or premium of the currencies in which it trades.
Now imagine that this optimal FX hedging program was implemented on perfectly designed spreadsheets. Armed with super-efficient spreadsheets, the finance team would project forecasted revenues and expenditures, calculate the firm’s exposure to currency risk and set a time frame for the execution of hedges.
A treasurer’s dream come true? Not so fast.
Any reasonably well-designed currency hedging program goes through a process in three phases: the pre-trade phase, the trade phase and the post-trade phase. Each of these phases, in turn, comprises several intricate steps. And here’s where a wholly unexpected risk would sneak in, with potentially devastating consequences: spreadsheet risk, the silent killer of performance.
Spreadsheet risk is omnipresent
This document contains a comprehensive illustration of the current state of treasury technology and the exciting future direction using new tools that are already with us. This FinTech analyst report from Strategic Treasurer takes a look at the current health of the TMS space and what benefits can come from implementing a treasury management system in your operations. Additionally, this report covers emerging technologies within treasury, such as the use of robotic process automation, artificial intelligence, and more.
Understand the current TMS space and its benefits
The Treasury and Risk Management Systems Analyst Report offers a thorough evaluation of the TMS space by covering the emerging uses of AI/ML (artificial intelligence and machine learning), RPA (robotic process automation), and API (application programming interface) technologies in treasury.
It also discusses:
- The place of a TMS/TRMS in business continuity planning and preparing for disruption and volatility
- The best practices and proper mindsets for avoiding pitfalls in selecting, making a business case for, and implementing treasury technology
- The varied ways in which these solutions address the day-to-day pain points and inefficiencies of treasury departments
Download it now!
Máximo holds a PhD in Economics and is graduated in Law. After 18 years working in International Cash Management in several multinationals coordinating local treasury units with the headquarters or implementing new ones all around the world, he is working as a university professor of finance, treasury and business strategies in several Universities and Business Schools in Spain. He is also a regular contributor in international media such as Forbes México, Forbes Centro America or Revista Gestión of Ecuador for the last five years.
“My first job in treasury was the best you can wish for”
As a researcher he has published more than 30 articles in research journals about banking systems, treasury, finance in general, fintechs or international sanctions and at the same time he is a referee in postgraduate research journals. He also collaborates with Think Tanks and international institutions in different ways.
We are delighted to share the interview with Maximo. Let’s dive into his treasury journey and Máximo’s opinion about the future of treasury combined in 8 questions and answers.
1. How did your treasury journey start?
After finishing my studies in economics, my intention was to work for a bank. In fact, my first professional steps were in banking. However, one day I saw a job offer that looked very interesting and I applied for it. Normally, I always prepare the job interviews in detail but this didn’t happen at that time. So, I went to the interview with no visibility of the company I was applying for. After a couple of quick interviews, I was selected as a treasury analyst for Cemex European headquarters.
Everything was perfect. My first job in treasury was the best you can wish for. I was part of the team of international cash management and Cemex at that time was in the middle of fast growth movements. Cemex acquired different subsidiaries worldwide and I was in the center of all those financial flows. There was much stress but the work atmosphere was fantastic and the promotion possibilities were reachable.
2. What do you like about working in the world of Treasury?
Most of my career in treasury has been focused on the international side and that provides an unpayable extra value. Thanks to being an international treasurer I have learned a lot about how treasury and finance work worldwide. I have had the opportunity to see how the banks work in many countries and how different companies from different sectors and industries adapt their cash management to their operative peculiarities and the markets where they are inserted.
3. What is your Treasury Expertise?
International cash management is my greatest strength in the treasury world. Most of the time in my treasury career I have worked as a coordinator of local treasury units. That role has allowed me to see different approaches to similar issues in different countries.
4. What has been the best experience in your treasury career until today?
In my first years in treasury, I had to coordinate the movement of funds (in three currencies) between different subsidiaries located in different countries and different banks on the same day. The number of funds moved was very high and the number of countries where the money passed through was also high (more than 20 countries in three continents). I was preparing the operation for a week and finally everything went fine. For me it was quite stressful as the operation was completed finally in 15 hours and it was necessary to compensate several delays in the intermediate transactions. When you prepare in detail a complex operation like that and everything is completed as forecasted you feel very proud of all the work done. After that operation, I have coordinated other operations quite similar but the level of stress has been much lower compared with the first one.
5. What has been the biggest challenge in your treasury career?
In the year 2005 Cemex sent me to Italy for three years to set up a new treasury unit in the country. For me it was a big challenge. First of all, because I didn’t speak Italian when I went there and soon I realized that to speak Italian is a key point if you want to do your job properly. Secondly because although I worked for a big multinational, the Italian subsidiary was quite small and the approach of the local banks was completely different to that I saw in the Cemex European headquarters in Madrid.
6. What is the most important lesson that you have learned as a treasurer?
Things work if you prepare them in detail. You can have a very complex operation in your hands but if this operation is prepared in detail (forecasting different scenarios and alternative solutions) the final success is almost guaranteed. Good preparation is the key to success.
7. How have you seen the role of Corporate Treasury evolve over the years?
The function has changed a lot. When I started in treasury in the year 2001 the administrative workload was the most relevant part of the treasury function, at least in time-consuming. Today instead and thanks to technology the time spent on administrative issues have been reduced significantly. That reduction has allowed the treasurer to dedicate more time to other issues that generate more value for the company. A good treasurer today must know much more than before about technology applicable to the treasury function and must also have strategic thinking.
8. What developments do you expect in corporate treasury in the near and further future?
The treasury teams will be smaller in the future. The technology will reduce all the administrative treasury tasks to the minimum. The treasurer of the future should be focused on technology, strategic thinking and create additional value for the company. To reach that goal, the corporate treasurer should be passionate about the function and must be always informed of the latest developments in the market. The corporate treasurer should know the latest developments in technology, in treasury products, in treasury strategies… always learning. The treasurers of the future should communicate better and invest time in treasury education and build treasury networks to exchange knowledge with other colleges or experienced treasurers. To sum up, the treasurers of the future should increase their impact in the companies thanks to the technology developments.
Does your business need support in Treasury or a Treasury QuickScan?
It seems like every day there is a new fraud headline. As a result, companies are learning that preventing fraud needs to be a responsibility of all employees in the organisation. To prevent fraud, an organisation needs to focus on education through training, standardized controls, and IT policies on top of a strong technology solution.
The threat of fraud has grown dramatically in recent years. In fact, according to the 2021 AFP Fraud and Control Study, overall, 74% of companies have experienced fraud or attempted fraud. Your organisation needs to be prepared and Treasury activities need to support identifying and preventing fraud. Recently, I had a conversation with a Treasurer who said, “if it’s (fraud) not on your mind in Treasury, you’ve already lost”. He went on to talk about how much more difficult it is to manage fraud when you have a decentralized Treasury team.
Best in class fraud prevention is about having a strong overall ecosystem, culture and technology – the fabric of an organisation. Fraud prevention must be top of mind for everyone in the company. Specific training should be included in introductory orientation as well as ongoing training and annual awareness campaigns. Individuals need to be able to identify potential phishing and Business Email Compromise (BEC) campaigns to ensure they don’t become victims. It only takes one person to make a poor judgment call to allow access into a company’s system. It’s also important to consider cultural differences for offices in other parts of the world. Fraudsters are taking advantage of cultural norms. In some Asian countries it’s natural to defer to individuals with seniority. For example, receiving a message from the CFO to make a payment wouldn’t normally be questioned. Make sure that all individuals have a way to share, escalate and/or stop a transaction when there could be potential problems.
Standardised procedures are essential. With BEC, fraudsters assume that using the name and email of senior members of the management team, such as the CEO or CFO, will cause employees lower in the organisational hierarchy to do as instructed without question. To combat this, it is imperative that the procedures set up require strict adherence, and that senior management provides an environment where fewer senior members of the team are comfortable asking whether a payment is legitimate. If multiple ERP systems exist, ensure that consistent approval processes are in place across all systems. For smaller regional offices, set up procedures and approvals to ensure that separation of duties is in place and that you have visibility to the activities in remote offices. Some fraudsters like to target attacks on regional offices in hopes of bypassing some of the more stringent processes that are in place at headquarters.
Having an IT focus on fraud prevention and policies that support these efforts is also essential. IT should ensure that employees are password protected and that their passwords aren’t easily guessed. They should maintain strong firewalls and keep current on technology to identify potential hacker activity. In addition, it is helpful to randomly test employees with phishing emails to assist employees in recognizing fraudulent emails.
Finally, technology solutions to identify fraud are a critical component of fraud prevention. Solutions should include rules-based fraud detection that identifies multiple scenarios, for example situations where a vendor bank account number has changed. These transactions should be flagged and sent for validation. An individual should call the company using a phone number that is listed in the system of record. Or, the transaction should be sent for account verification allowing for confirmation that the bank account is owned by the organisation that is to be paid, and not some fraudulent entity. Account verification is a new tool that is being added to rules engines. It allows you to increase your confidence that the account is owned by the entity with which you have a relationship without having the time-consuming process of having to reach out to the entity directly to verify. The verification is quick and doesn’t slow down legitimate payments. Your fraud technology solution should also identify other fraud situations that you and a community of your peers have experienced or considered.
Machine learning to identify payment anomalies based on transaction history is also critical. It allows for patterns to be identified in the immense amounts of transactional data that your organisation has accumulated and then to match that in real-time to your specific transactions to identify potential fraud. This added layer of protection looks for behaviours that may not be identified by the human eye – timing of invoice receipt or change in the frequency of payment requests. The system continually adapts based on the information that it is tracking and provides suggestions when it identifies potentially fraudulent behavior.
Fraudsters continue to attack since they only need to find that one weak link on one day with a single person in your organisation. It’s up to you to make sure that the individuals in your company are prepared for the attack. Ensure that you have a training program that helps your employees identify potential fraud attempts. Define, monitor and enforce policies that support segregation of duties and consistent processes throughout the organisation. Confirm that your IT department is staying on top of technology that identifies and prevents hackers and supports best practices when establishing policies across the organisation. Last, but certainly not least, make sure that you are utilizing best-in-class technology to identify potentially fraudulent payments to stop those payments from going out your door. Some treasury solution providers use the terminology fraud detection tools to refer to having sanction screening or workflow tools in place while others notify you of a fraudulent item after the transaction is sent to the bank. A best-in-class technology solution combines workflow tools and approvals in addition to a robust rules engine and machine learning to identify potentially fraudulent transactions in real-time. Giving you an opportunity to stop any transaction before it leaves your organisation.
Preventing fraud is something that everyone in your organisation needs to commit to in order to prevent fraudsters from being successful.
Nederlandse banken overwegen in toenemende mate hun processen uit te besteden en zoeken steeds vaker samenwerkingspartners binnen de branche. Hierdoor kunnen ze efficiënter opereren en hun risico’s verlagen.
De bankensector staat wereldwijd onder druk. Om concurrerend te blijven nemen ze tal van kostenbesparende maatregelen, van het sluiten van bankfilialen (tussen 2015-2019 daalde het aantal bankfilialen met een kwart) tot het verkopen van minder winstgevende activiteiten (voorbeeld: ING verliet begin dit jaar de Oostenrijkse markt voor consumentenbankieren) en het opschroeven van de automatisering om in het personeelsbestand te kunnen snijden.
Het outsourcen van belangrijke diensten en taken komt ook steeds nadrukkelijker in beeld, blijkt uit een onderzoek eind vorig jaar van adviesbureau Enigma Consulting, gehouden onder vijftien banken. “Zeker de kleine en middelgrote banken zijn op zoek naar kostenverlaging. Door uit te besteden kunnen ze kostenbesparingen realiseren”, valt te lezen in het rapport.
Het uitbesteden van IT-processen is al gemeengoed in de sector, vooral voor gebieden als IT-infrastructuur, werken in de cloud, applicatiebeheer en werkplekbeheer. Maar banken houden hun ogen ook open voor andere segmenten, zoals het uitbesteden van de hypotheekadministratie of een deel van het betalingsverkeer.
Naast het realiseren van de hard nodige besparingen kan outsourcing ook leiden tot minder druk op de investeringen. Bijblijven bij de enorme ontwikkelingen in de bankenwereld – denk aan wet- en regelgeving, open banking en de toenemende concurrentie van fintechs en bigtechs – kost nu eenmaal veel geld.
Partijen die outsourcingdiensten leveren specialiseren zich in een bepaald vakgebied en hebben de kennis en expertise om voorop te blijven lopen in dit domein. Daarbovenop komt dat de meeste grote outsourcingbedrijven die banken bedienen multinationals zijn, waardoor zij beschikken over het wereldwijde netwerk om banken te ondersteunen op elke plek waar zij actief zijn.
Door hun specialisatie zijn outsourcingbedrijven in de regel beter in staat om bankprocessen te beveiligen tegen cybercriminelen. De steeds hogere eisen die worden gesteld aan cyberveiligheid zijn veel banken een doorn in het oog, en zij moeten steeds meer geld investeren om hun assets en informatie uit handen van kwaadwillenden te houden.
Samenwerking binnen de branche
In sommige gevallen kijken banken niet naar outsourcing, maar juist naar mogelijkheden tot samenwerking. Dit doen ze vooral op thema’s waarvan ze denken dat deze niet door een derde partij uitgevoerd dienen te worden, of op gebieden die nog in hun kinderschoenen staan, waardoor ze liever samen met gelijkgestemden innoveren dan met een ‘buitenstaander’.
Het onderzoek van Enigma Consulting laat zien dat ook deze variant aan populariteit wint. Belangrijkste voordeel: het kunnen delen van kosten en risico’s met andere banken. Voorbeelden zijn er volop. Denk aan Geldmaat, waarbij Rabobank ING en ABN Amro gezamenlijk pinautomaten exploiteren.
Ook werken banken aan een gezamenlijk systeem voor het uitvoeren van know your customer (KYC)- en anti money laundering (AML)-taken. Compliant zijn aan regelgeving op dit gebied kost veel geld en bovendien zijn banken afhankelijk van elkaar voor een goede opsporing van verdachte transacties of crimineel geld. Om tot een vruchtbare samenwerking te komen schakelen de samenwerkende banken veelal een onafhankelijke tussenpartij in.
Meer weten? Lees ‘Samenwerking kan banken helpen met AML en KYC professionalisering’.
Een andere reden om de samenwerking te zoeken is om standaarden te ontwikkelen. Als iedere bank haar eigen pad bewandelt bij het ontwikkelen van oplossingen brengt communicatie en afstemming tussen de banken (en bijvoorbeeld de toezichthouder) complexiteit en hoge kosten met zich mee. “Een gezamenlijke ontwikkeling kan ervoor zorgen dat er één standaardoplossing komt voor de Nederlandse markt”, schrijft Enigma Consulting.
De outsourcingtrend en de toenemende vraag naar samenwerking passen volgens adviesbureau PwC in de bredere ontwikkelingen waarbij banken steeds meer openstaan voor externe partijen. Steeds vaker trekken ze op met fintechs en andere bedrijven met het oog op het creëren van win-win situaties of versnelling op een bepaald gebied. Volgens PwC is het aantal partners waarmee Nederlandse banken samenwerken met 300% gegroeid in een periode van vijf jaar.
BANKENSURVEY – THEMA: OUTSOURCING
De bankensector maakt een enorme transformatie door en de concurrentie groeit. De oorzaak van deze transformatie kent meerdere drivers, zoals het voldoen aan wet en regelgeving, de PSD2 en open banking, concurrentie van Fintech’s en challenger banken en verdergaande digitalisering ter verbetering van de klantervaring zoals bijvoorbeeld de introductie van Instant Payments afgelopen jaar.
Bovenstaande ontwikkelingen vereisen voortdurende investeringen in de bancaire infrastructuur van core banking en betalingsverkeer. Voor banken met oude legacy systemen zijn de investeringen immens en dit brengt hun concurrentie positie in gevaar. Steeds meer banken onderzoeken de mogelijkheid om hun processen te outsourcen en op deze manier kosten, verandercapaciteit en kennis te delen met andere banken .
Deze korte survey geeft inzicht in de bereidheid in de Nederlandse markt om bepaalde bancaire processen te outsourcen en eventueel tot samenwerking te komen.
(Spoiler: it’s not about trading costs)
A few years ago, PwC consultants proposed a clever analogy to illustrate the difference between single-dealer platforms (SDPs) and Multi-Dealer Platforms (MDPs). For banks looking to provide products and services to corporate clients on a platform, SDPs are like an airline’s website, where high-margin sales occur. Multi-Dealer Platforms, in turn, are the equivalent of online aggregators that let customers compare fares and schedules. While the former emphasizes customer relationship intimacy, the latter work as “transactional supermarkets” with a higher degree of automation.
When it comes to the corporate FX market, where spot and forward transactions take the lion’s share in terms of traded volumes, Multi-Dealer Platforms like 360T and SWAPs have been the venue of choice. The shared technology of Multi-Dealer Platforms has enabled them to better adapt to changing customers’ needs than the proprietary technology of most Single-Dealer Platforms. As a result, corporate treasurers have moved en masse to Multi-Dealer Platforms to improve FX trading processes and reduce spreads. As Kantox’s CEO Philippe Gelis argues, the success of Multi-Dealer Platforms has resulted in a spectacular “compression of FX spreads for vanilla products”.
Beyond trading costs: the value proposition of Multi-Dealer Platforms
Lower FX trading costs, the natural result of the Multi-dealer platform proposition, play an important role by facilitating the participation of firms who see a benefit in ‘embracing currencies’ to access new markets and grow their business. But the fixation with lower spreads is unwarranted. Going forward, treasurers will care less about paying 9 bps instead of 10 bps, if a 2% move in the exchange rate can be easily and efficiently handled by an automated hedging program.
To see where the real value of Multi-Dealer Platforms lies, let us start by briefly looking at the three phases of the FX hedging workflow: pre-trade, trade and post-trade.
The pre-trade phase involves sourcing exchange rates for the purpose of pricing as well as capturing and processing the relevant exposure. Once the FX trade is executed and confirmed, the post-trade phase kicks in with reporting and performance analytics as well as accounting and payments and collections.
In this increasingly automated series of steps, MDPs play a key role. Kantox’ partnership with 360T, for example, provides straight-through processing integration for corporates of all sizes to tailor their Multi-Dealer Platform setup to execution and routing rules of their own making. The range of functionalities includes:
- Trading in spot, forwards, NDFs and swaps with hundreds of liquidity providers
- Automated trade and data requests via API
- Transparent pricing with greater efficiency in sourcing
- Diversification in order to lower counterparty risk
- Ability to select preferred liquidity providers
- Complete trade history and audit trail
- 24/6 execution capabilities
- ‘Best price execution’ functionality that puts liquidity providers in competition with one another
- Conditional orders setup with order management tools
- Automated trade confirmation by API or email
What emerges from this picture is clear: the ‘trade phase’ of the FX corporate workflow is being automated at lightning speed. The reduction in spreads, while important, only tells part of the story. The real value proposition of a Multi-Dealer Platform lies elsewhere: they are an integral part of the seamless, end-to-end management of corporate currency workflows that Currency Management Automation solutions provide.
This process of automation comes with an added bonus: Application Programming Interfaces (APIs) ensure that data can flow seamlessly between different systems (ERP, TMS) without any need for spreadsheets, reducing spreadsheet risk and freeing up valuable treasury resources.
When viewed in this broader dimension, as part of a larger process that includes all the phases of an automated FX hedging program, Multi-Dealer Platforms are part of an ecosystem that allows companies to benefit not only from automating, one by one, the different phases of a hedging program but to have all these processes integrated with one another, thus creating more value than the sum of the parts.