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 20<strong>23</strong> e-FOREX
Exotic to some. Home market to us. A global bank with Scandinavian expertise. MAY 20<strong>23</strong> e-FOREX 25
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