e-Forex-May-23

The Nordics: Demand for digital FX services is now focused on more sophistication through proven technology
“API adoption continues to play a big role in the development
of future-proof solutions going from the SMEs all the way to
our largest corporates and financial institutions”
much more fruitful and saved time
for all market participants in defining
what is acceptable behaviour and
what is not.”
REGIONAL E-FX PERSPECTIVE
Carolina Trujillo
Carolina Trujillo, Head of e-FX
Distribution at SEB, explains that
current trends point towards
increasing demand for electronic
sophistication, not just adoption.
“At this stage, I see two main
trends,” she says. “The first one is
sophistication for some clients that
are more conscious of different
offerings, from established platforms
or banks to fintech alternatives, and
want to understand the implications
of those choices, and when it is the
right time for them to make those.
This can mean anything from adding
algos or share class hedging to your
trading tools to rebuilding your
infrastructure to make sure you have
the best solution to fit your needs.”
“The second trend,” she continues,
“is the broadening of the scope
of “electronic FX” from just the
execution to pre and post-execution
focusing on the automation of those
components.”
At first glance, one would think
this demand can only be fulfilled by
increasingly advanced technology.
However, Matti Honkanen, Director,
Head of NextGen FX at Nordea,
doesn’t think so. “It is a common
misconception that the ongoing and
upcoming digital transformation
will be driven by new emerging,
revolutionary and unforeseen
technologies,” he says.
“Nordea’s position as one of the
leaders in digital FX is not based on
the extensive use of technologies, but
on a smart and customer demanddriven
use of unexciting technologies.
We certainly try new technologies, but
quite often we figure out the old tech
can do the job better.”
Given these trends, how are Nordic
banks addressing customer needs and
changing market regulations?
REGULATORY CHANGES AND
ADOPTION OF THE FX GLOBAL
CODE
The FX Global Code has been widely
adopted by institutions worldwide,
and the Nordics are not an exception.
However, mirroring worldwide trends,
some work remains to be done.
“A very high ratio of the sell side is
onboard but the adoption on the buy
side is lacking,” Trujillo says. “SEB is
very involved in the work done by the
FX Global Code and it is surprising
how some FX participants of large
buy-side firms have not heard of the
FX Global Code at all, so there is still a
lot of work to be done there.”
She points out that while the Code
positions electronification as the best
way forward, its true impact lies in
clarifying grey areas in workflows. “All
signatories of the FX Global Code have
an interest in promoting it to their
counterparties,” she says. “I would
say that the main effect of the Code
has been to clarify some grey areas
or confirm which market practice to
follow. This has made conversations
While the Code’s adoption is a priority,
of more urgency is adapting to the
raft of regulatory changes FX has
witnessed recently. Trujillo notes that
global changes have had a far bigger
impact than local ones. She cites
a pertinent example. “One of the
changes has been caused by SA-CCR.
It affects the liquidity offering from
some banks forcing a re-shuffle of
main providers in the forwards and
swaps space.”
A need for constant electronic
upgrades in response to regulatory
changes is a trend underway in
Scandinavia, reflecting the global
market. Trujillo believes market
participants must think deeply about
the value they deliver to clients with
tech upgrades versus the need to
upgrade tech to keep pace with
regulatory changes.
“All global platforms must comply with
so many different regulations,” she
says. “This is forcing some of them
to carry big upgrades that have an
impact on all their clients including
the Nordic sell-side and buy-side. The
amount of tech resources needed to
keep pace with regulatory changes is
significant and needs to be carefully
balanced with tech activities that
deliver value to clients.”
INNOVATIVE PRODUCTS AND
TREASURY AUTOMATION
Treasury automation is a good example
of an activity delivering significant
value thanks to electronification and
technological adoption. Nordea’s
Honkanen has kept a keen eye on
developments in this space. He says
automation is steadily progressing,
with different market players at
different places in the journey.
24 MAY 2023 e-FOREX