When time means money, corporate treasurers are increasingly looking for ways to improve processes, including making foreign exchange transactions more efficient and user-friendly. Standard Chartered's Online Trading platform allows customers to book rates, place forward orders and execute transactions without picking up the phone to a dealer. It streamlines the process using the technology of the internet.
Many of the capabilities that internet trading of foreign currencies promised to deliver, are now a reality. The worldwide web has brought optionality, customization and execution information to forex trading, making it more accurate, less risky and less reliant on traditional forms of communication such as the telephone. Customers using online trading can price and trade almost every currency in the world through a user-friendly web browser interface. Currencies that still require some manual intervention are those bound by regulatory constraints.
Trendsetter
Standard Chartered has been at the forefront of online foreign exchange trading since 1999 when its portal was first launched. Standard Chartered, Singapore was the first bank in Asia to launch an online FX trading capability for its clients in 1999. Since then, the business has evolved significantly, expanding from G7 currencies to G10 currencies and then to emerging market currencies. Year on year, the volume of trades put through the system has increased by more than 100% - a true indication that the financial fraternity is now more comfortable with online trading.
The bank has built its business around the demand of customers - adding flexibility and functionality in line with adoption and acceptance of automation. There are many types of customers that use online trading, with the common thread being the need to find the best possible pricing and the greatest transparency. These goals are the same for large multinational companies and small-to-medium enterprises.
The On-Line Treasury FX trading platform offers secure, web-based trading convenience to more than 2000 users globally, allowing them to perform FX spot, forward, swap, time options and deposit transactions in over 700 currency pairs as well as access links to economic, technical, and FX strategy research.
The bank's experience shows that middle market customers have been the greatest adopters of Standard Chartered's proprietary internet-based trading platform and their foreign exchange needs are borne out of their importing and exporting activities. The larger they grow, and the more countries they trade with, the more sophisticated their foreign currency requirements become. As they grow, Standard Chartered has expanded with them and their businesses, often beginning as a single currency relationship and then maturing to multi-currency services.
While the bank believes the Internet can now meet 90% of the forex trading requirements of any company, it also understands the important relationship that treasurers have with individual dealers. Online Trading users are still able to call the dealing room to inquire about specific pricing or to get information on currency trends. Treasurers still have access to Standard Chartered's dedicated economists and currency strategists who specialize in trends in popular currencies but also emerging market currencies.
The comfort zone
Ensuring that customers feel comfortable with the system has been paramount to Standard Chartered's success. While customers see only the front end of the system, the bank has invested heavily in the back end - the piece that ensures the robustness of the system. The system's pricing mechanism is powered by a rates engine that gathers inter-bank market rates from a range of sources. These sources vary depending on which sources the bank's traders have indicated are the most reliable for a particular currency pair. More than this, the engine sorts through the information to ensure that it isn't tainted by spikes or abnormalities before being published.
Another area that has been given special attention is security. Three levels of security built around encryption and authentication help to eliminate the risk of tampering. The system is underpinned by an electronic digital key which forms the core of the security shield. Before a transaction can be made, users must enter an initial ID, a password and a pin number. These three elements mean that Online Trading complies with regulations set down by the Monetary Authority of Singapore and other authorities in countries with online trading.
Continual improvements
Standard Chartered's online forex services are not a static offering. The bank is continually improving the service and has recently added the trading of non-deliverable forwards (NDFs) to the site. Customers can now book rates for NDFs in some 11 currencies including the Korean won. More currencies will be introduced in the coming months.
In 2005 Standard Chartered began the roll out the next generation of Online Treasury (OLT3) in several phases. Upgrades such as real-time dealable streaming pricing and the ability to leave orders are in the development pipeline. There will also be increased functionality around deposits such as early take-ups and extensions. Each function is presented in a modular fashion so that the system can be tailored to a client's specific needs.
In the future, the bank will explore ways of integrating its automated forex systems with other cash management platforms.
