e-FX WeekFX

July 11 2016 v.2 n.28

e-FX Initiative of the Year:
IntegralInternalisation levels in major
maximum risk limits are
currencies have hit never-beforereached. Risk policies can beseen levels of more than 90% at
defined to suit different volatilmajor banks over the last few years
ity regimes; they include conwhen market conditions forced
trols such as position limits,liquidity providers to search for
P&L thresholds and hold times.
more efficient ways to manage risk
The Yield Manager is alsothan simply offloading positions in
integrated with the Integral PricVikas Srivastava
the open market.
ing Engine, which allows users toAs a result of tightening margins
skew
pricesdrivenbyand increasing regulatory pressures, dealers existing inventory and for exiting risk posilooked to exploit the strength of their fran- tions and hedging trades, as well as with thechises to match off client orders against each Open Currency Exchange (OCX), which
other in-house, or to risk-manage their own
provides access to both streaming and resting
positions more efficiently than on open mar- liquidity.
ket venues.
Customers can also access third-party exe“We started building Integral FX Yield
cution venues through the system, and they
Manager about two years ago in response to can connect to Integral’s midpoint matchinga number of banks and retail brokers asking
engine OCX RiskNet to rest positions on theus if we could help find a solution that enables
platform, without having to monitor them
them to internalise customer order flows,” and their impact on the overall risk position
says Vikas Srivastava, managing director in in Yield Manager.
business development at Integral.
“For the internalisation to be successful,“Internalisation was the driver on the bankyou want to have flow at both the bid and theside, because as the market became more offer to earn the spread, so you want as muchcompetitive, internalisation has become one
uncorrelated flow as possible. Say a retail broof the prerequisites of being successful in this ker in Turkey and a retail broker in Cyprus
business,” he adds.
with different customer profiles have opposThe result of the build, the so-called Inte- ing flow; now they can match off that opposgral FX Yield Manager, won the judges’ votes ing client interest by offsetting risk against
to top the e-FX Initiative of the Year category
their peers’ franchise, which will allow bothat the 2016 FX Week e-FX Awards.
brokers in this example to extend their wareThe big selling point for the Yield housing capabilities,” says Srivastava.
Manager was its ability to offer banks and“In fact, one of the biggest advantages of thisbrokers a fully-automated FX risk manage- fully integrated system is that it’s interconment suite that covers the whole life cycle of nected with the wider Integral ecosystem,
internalisation and warehousing, without including RiskNet, a midpoint matching facilhigh costs.
ity in which banks and brokers’ warehouses
This includes client flow segmentation, set- offset their inventories against each otherting risk-management policies, monitoring
without impacting the market,” he adds.
risk and yield in real-time, auto-skewing of
And while the success of peer-to-peer tradprices and the ability to auto-hedge risk once ing networks depends on the size of the netFX Week July 11 2016

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work, the ability to adjust risk-management
policies and monitor their effects in realtime gives business users unique control
over their operation.
“Regional banks and retail brokers
especially have a need for high-end warehousing technology for B-booking trades. But myguess is that we may see some of the largest FX
banks considering offerings like Yield Manager in the near future, as the cost and timesavings from cloud-based solutions becomes agreater competitive advantage versus in-housedevelopment,” forecasts Srivastava.
The backdrop provided by conditions incurrency markets, one of the big spikes inprices, high event risk and a significant uptick
in volatility, is likely to mean that liquidity isgoing to remain a big focus for banks. Sharp
price swings in the thin liquidity market will
also pose a problem for retail brokers, forwhom the availability of credit has become
increasingly difficult, so the ability to reduce
their balance sheet usage by using an internalisation tool could be significant.
“The company has always prided itself on
solving real-life problems for clients in a collaborative way. When clients ask us for something, we work very closely with them toarrive at a solution that best serves theirneeds,” says Srivastava.
“Integral was founded 21 years ago with asingle purpose: be the trusted technology
partner to help our clients grow their businesses. That’s what we continue to do today,”he adds. FX Eva Szalay

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