Larry Levy of e-Forex interviews John Stead, Head of Global Pre-Sales at smartTrade. John speaks about smartTrade's comprehensive range of solutions, emerging trends in FX and how smartTrade can help overcome the challenges of aggregation such as TCO (Total Cost of Ownership) and other factors affecting profitability and efficiency.
LL: How has covid19 impacted smartTrade in particular and the Forex World in general?
JS: We haven’t seen so many changes at the smartTrade service or product level. Of course, for our clients, there are a lot of stresses and challenges in many areas. But we the feedback from our clients is that smartTrade systems have been performing really well.
Indeed, every system works well in normal conditions and you only really get to see the good systems (and vendors) when there are stresses like high rates through put, large volumes, etc.
On the personal side, it has been challenging for a lot of people. I feel that smartTrade has reacted effectively. We had already a work-from-home policy that has been extended so people can adjust to this new situation. I have to say that the transition has been made orderly and it is quite impressive.
On a practical level smartTrade has been supporting the Folding@Home project which uses distributed computing to simulate protein dynamics to support research in Covid-19.
LL: Just as a side question John, where is the main location for smartTrade and where are smartTrade offices located?
JS: Our head office is in Aix-en-Provence in southern France. Then, we have London, Milan, Geneva, which opened recently, New York, Singapore, and Tokyo. So, we have global coverage for all our clients.
LL: Pretty good. As someone who speaks to clients and prospects regularly, what are the hot topic that you see?
JS: All these topics change day-to-day, month-to-month, but there are probably four main topics, mainly around profitability, that are more relevant now:
There is a lot of hype around artificial intelligence and how it is going to revolutionise our lives in the future. However, many clients have more immediate, tangible problems such as:
- “How do I onboard new clients quickly?”
- “How do I adjust spread when clients trade?”
- “Can I manage positions automatically?”, “Adjust hedging strategies”
- or importantly, “How can I stop trades falling off the automatic processes and going through to DI (Dealer Intervention)?”
2. Transparency and Costs.
Many people in the industry struggle to know what is their actual total cost of ownership (TCO). At smartTrade, we dedicate a lot of time looking at this with clients and prospects and some of the results we have are very compelling.
It is not only about spreads and rejection rates. It is also about how your LPs are being charged to supply liquidity, if your vendor has a conflict of interest by charging LPs and how do you keep a good LP relationship.
And then we can get into things like spread capture optimisation, XVA, balance sheet costs, time to market, R&D, etc.
Calculating the TCO can be very complex, but we have a lot of experience in this area and are very happy to help clients to understand it.
3. Managing your liquidity partners.
How can you help your LPs to give you the best possible price?
There are many variables here: full amount execution, not being charged, hitting them with the correct algo, hedging logic, anonymous vs disclosed trading. These are all factors that help with the relationship.
On top of it, you can integrate our analytic tool: smartAnalytics. It helps you to make sure that your LPs are delivering all the services you require like high performance, low rejections, low latency etc. Of course, LPs are keen to win your business. But it is a two-way street and clients also have responsibility for their own flows to make sure they get the best service.
4. Information overload.
Currently, we are swamped with information. I often hear from many people in the FX industry: “I’ve got so much information but is it really useful? And is it presented at the right time?”
For example, let’s say you try to price a manual trade. What would you want to know immediately? You want to know the previous acceptance rate, the profile of the client, the kind of trades they are doing, immediately as you go to price it. You don’t want to look at that later, you want it right there in front of you. Or you want to adjust the mark-up profile and know what the yield on this client split by different criteria is.
These kinds of issues have been a big focus of our R&D effort recently and drive concrete steps to help deliver for our clients.
LL: How can smartTrade help its clients to grow their business?
JS: There are a few different areas. We have had a lot of feedback that people and banks want to consolidate their vendors, but also, they want to offer more products through the same platform. They are looking more at vendors, like smartTrade, that can offer these additional products. Banks can then attract more clients without having to deal with the risk of bringing more vendors into the chain. For example, smartTrade has recently introduced money market trading last year, equities CFDs this year and FX options trading being released as we speak. It is about offering more services to your clients, so they don’t need to bring in new vendors into the chain.
In a similar vein it is worth mentioning we already have clients trading fixed income products such as corporates, govies and IRS through the same cross asset platform. Even if we have a lot of experience in FX, it is not the only segment we serve well.
Another area people are growing their business is second white label. We’ve recently had a press release from one of our Swiss clients: BCV. They have started to use a second of a white-label through smartTrade. It has been a way for them to automate the distribution of their flow to their partners without having these manual processes of calling out for pricing. So, it is a win for everyone, the bank gets to distribute their flows electronically replacing manual processes. The second level partner is able to access advanced technology which would otherwise be out of reach.
So, it is around consolidating vendors, offering more products and white-label is an interesting topic.
LL: In terms of regulators and compliance, what efforts have you been making in that area?
JS: There are two key topics, the global nature of the industry and how you interpret the rules.
We have clients in many different regions, each region has multiple jurisdictions. For example a client in Germany has to consider not only MiFiD but also BaFin requirements. And even within BaFin there are interpretations of the rules. So how do you have a platform that locates all these needs?
Our solution is providing an open platform and an open system. We help clients to extract out all the relevant information they need via standard APIs which are easy to integrate. The kind of information that smartTrade makes available for example includes algo flagging, quote data issued during the RFQ window, other standard data, plus features such as controls for rates and orders levels, etc.
Our real drive is to make sure that we are open as possible and can supply all the information that you need. That also brings some side benefits, not just around regulations. If you can inject and take out as much information as possible, it means procedures as injecting your logic and your IP become very easy. And our clients are doing it now, for example by pushing dynamic pricing and hedging adjustments.
This approach gives our clients the flexibility to adapt to not only their specific regulatory requirements but also makes everything agile enough to adapt to changes that will inevitably arise in the future.
LL: Next question, what really sets smartTrade aside from other vendors we see in the market?
JS: There isn’t one specific feature, it is actually simple: we have a solid product that works, live clients using it and it has a great team behind it.
smartTrade solutions, LiquidityFX (LFX), smartAnalytics and smartFI, deliver market requirements and solid return on investment (ROI). You might say: “Doesn’t everyone do that?”. Well, it’s not really the case.
We have plenty of stories of prospects saying: “we went for this vendor and it took ages to get things live.” Or “someone didn’t fully understand the market, so they took ages to adhere to requirements” or “We couldn’t integrate our system with someone else”. These are the kind of things we hear about other vendors and you end up with latency, rejections and disappointed clients.
The differentiation with smartTrade is a solid product that works, and that is live with many clients.
Another common differentiator is the Total Cost of Ownership. When you compare us to other systems, clients find that when they take into account the full TCO we actually end up being much more cost effective due to eliminated hidden costs (i.e. LP charges), dynamic product roadmap due to high R&D investment, quick time to market, deep market experience, full ownership of technology, cross asset coverage and eliminated conflicts of interest.
LL: What somebody should do if they are listening to this podcast and are interested in knowing more?
JS: Get in touch! We have a very knowledgeable sales and pre-sales team. We have many years of experience in FX and other asset classes. Chances are we will have an idea of how to help you because we have already served clients with a similar scenario. We would love to listen to your current challenges. It is about understanding where your challenges are, where you want to grow your business, what is stopping you to do so now.
We have a lot of successful client use cases that we can share with you. They can make you look at your business from different perspectives and help you grow your business in areas that you might haven't thought of. How we helped other clients grow is something we would be happy to share with you. Sharing our experience with other people is definitely one of the benefits of choosing smartTrade.
LL: Finally, John, let’s talk for a moment about the future. Where do you see the industry going? Where do you see the aggregation market going? And what are the current trends?
JS: For the aggregation market, Automation is always a trend. Everyone is always looking to grow their business and volumes without expanding their systems or personnel. “How do I automate more?” and, as I said before, one day AI and machine learning might solve all those problems.
However, there are much simpler problems that people are looking to solve now like “how do I analyse my execution performance and adjust my algos accordingly?”. For these problematics, you don’t need machine learning and AI. You need logic which is the kind of things smartTrade is building about to answer questions like :
- “If I get rejected too much, what do I do?”
- “Do I want to turn off an LP, do I want to haircut them?”
- “If I found that they have lots of market impact, can I adjust it?”
In aggregation and, also in distribution, it is about automating more and more processes so than you can deliver more ROI. When we go to meetings, we always try to drive home the message that “automating frees up people to do more useful things!”. FX professionals want to add value in different areas. Having someone sitting and smashing a keyboard used to be useful 20 years ago but now the boundary between what is technology and what is trading is blurring. It is about getting coders and traders to talk together and work out how you can offer the best possible service.
The technology and the trading people coming together is essentially what eFX is about. In conclusion and to sum up, I would say more automation and less distinct roles (trading and technology).