something to smile about? - Euromoney Institutional Investor PLC

GFI GROUP OFFERS SOLUTIONSTO CORPORATE TREASURERS FORMANAGING CURRENCY RISK EXPOSUREA STATEMENT BYGFI GROUPDo you manageFX exposure?Currency volatility is an issue that concernsthe finance department in everylarge corporation across the globe, andthe recent instances of a depreciatingdollar and a strengthening euro overthe last year provide ample evidence of the kindof challenges they face.But how can a corporate treasurer gain greaterunderstanding of currency fluctuation or accessindependent price discovery and analytical toolsfor the FX options markets? CF decided to sit downwith GFI Group, an inter-dealer brokerage, marketdata and analytical software provider for theglobal cash markets, to get the inside view.Activity in the currency options business is rising,largely due to the levels of volatility that GFIhas seen in the FX markets over the last 12months. This volatility in FX increases the need forhedging and therefore the demand for pricingtools, such as GFI’s FENICS ® FX.So why is FENICS ® FX such a good optionfor corporate treasurers?GFI’s FENICS ® FX has over 15 years experiencedelivering transparent and independent frontofficepricing and analysis software to themajority of banks active in FX options. But increasinglycorporate treasurers of varying market capsare looking to adopt this kind of technology tomanage their company’s currency risk exposure.Nicola Williamson, the FENICS ® FX product managerexplains: “While some corporates engage incurrency hedging transactions of millions ofdollars a day, any company hedging their currencyexposure with FX options would have use for FEN-ICS ® FX.”FENICS ® FX has a range of analytical tools allowingusers to perform “what if” analysis. It also runsthe critical reports required for instant overviewof currency derivative profiles and the system can®FENICS FXbe customised and integrated with corporates’middle and back offices.Judging from its existing client base theprospects for the product seem strong. As Fiatnotes: "We value FENICS ® FX because it offers usan independent and accurate tool for pricing andrevaluing vanilla and exotic currency options"“FENICS ® FX also delivers independent data,”asserts Michel Everaert, global head of productdevelopment and marketing. “As a broker whichdoes not take market positions, GFI is ideally positionedto provide corporate treasurers withhard-to-find, independent, real time and historicalmarket data.” Demand for GFI’s data services,particularly its popular daily Revaluations Fixinginitiative, is expected to grow over the comingmonths in response to new accounting standardsrequiring market participants to mark their derivativespositions to market. Corporate treasurersmight have the technology and advice from theirbanking partners but they also need the independentand objective perspective as well.Pricing derivatives needs an independentmodel and independent data inputs. Everaertadds: “FASB 133 affects how you account for yourderivatives. As a treasurer you have to specify ifyou are using a hedging or speculative trade. If youcan’t account for the trade as a hedge you have touse a mark-to-market rate – in other words therate has to be ‘market observable’. That’s whereGFI steps in. Treasurers need a market observableprice for their trades.”The installation of FENICS ® FX can also complimentthe relationship between a corporate andits bank. Because the product is widely used in theindustry it means major banks are conversantwith the technology. “You’d be hard pushed to findprofessionals in the industry who aren’t wellversedin the use of FENICS ® FX”, points outWilliamson. cfFor more informationor a FREE TRIAL emailFX@GFIgroup.comor call +44 20 7877 8099corporatefinancemag.com March 2004 cf 31