With poor performance of its Instinet subsidiary driving underlying first quarter revenue at Reuters down by 13% on last year, the company continues to look at new ways to expand parts of its business that play to its core strengths.
One of these areas is its trading and risk management systems business. In April it announced two deals with partners to leverage Reuters technology in offering outsourced services. One, with IBM, is for 'pay-as-you-go' risk management services for small and medium-sized financial services firms in the Asia Pacific region, while the other is a deal with HSBC to provide its partner banks and corporate customers with outsourced foreign exchange (FX) trading services in key markets.
The IBM partnership will combine Reuters' Kondor + software with Big Blue's hosting, consulting and integration services. Reuters will also provide risk management advisors and specialist sales support, but both companies will market the solution to firms in the region.
The browser-based service will include risk analytics covering fixed income, equities, foreign exchange and money markets as well as market news and data, transaction and anti-money laundering services.
Mark Smith, Reuters Asia director, solutions, says risk management has become one of the key challenges for Asian financial firms due to regulatory changes and increased competition.
"Smaller financial institutions are seeking to adopt internationally accepted practices and methodologies to ensure they remain competitive as the Asian market opens to foreign financial institutions," he adds.
Reuters and HSBC are still discussing implementation plans of their proposed FX outsourcing service, which will be based on a new version of Reuters' automated dealing software, developed following the vendor's acquisition of AVT Technologies last December.
The service will utilise AVT Technologies' Echo FX product, which supports the outsourcing of pricing of FX transactions. Banks can use these capabilities to offer partner firms the ability to create their own branded electronic FX services.
Tony Cripps, head, e-commerce, HSBC Global Markets, says the bank reviewed a number of the available alternatives but the strength of the Reuters automated dealing offering and its ability to provide an ASP service provides HSBC with a powerful proposition for its white-label customers.
Mark Redwood, managing director, automated dealing technologies, Reuters, adds that the outsourcing of liquidity is a major driving force in the evolving electronic FX market.