Technology is transforming foreign exchange transactions and enhancing customer access to East Pacific Bank’s emerging market business
Technology plays a leading role in improving customer retention and converting currency transactions in emerging markets from voice spot to restricted currency* for digital workflows.
Commenting on the role of these platforms in expanding the bank’s EM business, the head of the global emerging market said: “In the short term, EM FX digitization can improve efficiency and add value to customers. In the long run, this is a positive effect for customers and Banks are important initiatives with great value and will take advantage of our inherent advantages in the Asia-Pacific region."
Gordon, head of customer visits and process execution for FIC Asia Pacific, talked about the driving factors of digital platform development and what this means for FIC trading business in global emerging markets.
Q: How will the electronic foreign exchange platform develop to cater to a wider range of emerging market currencies and related tools?
In the past five years, financial institutions' continued investment in digital solutions for trading platforms has expanded from G10 currency pairs to emerging market currencies. One of the structural driving factors of digital emerging markets (especially Asia) is that securities denominated in these currencies are becoming more and more important in emerging market indexes and exchange-traded funds.
Advances in algorithms and AI technology are making the tools available to traders and corporate clients on electronic platforms more complete. The main difference in emerging markets is that in addition to providing pricing in the local market, workflows are also required to enhance the functionality of the platform.
Q: What steps are being taken to minimize the operational complexity and manual intervention that prevail in the EM FX process?
Institutions are increasingly using application programming interfaces (APIs) to develop direct client connections and automated solutions (such as robots) to reduce manual intervention and improve transaction lifecycle timing.
In July, East Pacific Bank and BNY Mellon launched a new joint-developed, API-supported foreign exchange solution, which greatly shortens the confirmation time of restricted currency transactions in emerging markets. Initially, the Korean won was used for custodial foreign exchange transactions, and its purpose was to shorten the life cycle before the transaction from a few hours to a few seconds, in order to minimize the burden of operation and manual intervention.
The use of electronic platforms for non-deliverable forward transactions (NDF)** has developed in many fields. The number of electronic transactions NDF has grown steadily. Brokers such as EBS have increased the money supply, and institutions have increasingly provided more electronic NDF pairs and NDF algorithms to allow customers to adopt multiple electronic execution methods and increase transparency.
The focus of the algorithm is to enhance liquidity by using other tools (such as FX Futures to increase electronic price creativity), thereby improving execution around invalid dates and market events.