As the use of e-trading platforms continues to grow, a new e-solution has just been launched by Lloyds Bank Corporate Markets. More than just a trading venue, Arena offers the bank’s clients access to a full range of tools, economic research and analysis designed to help them formulate and execute their hedging strategies.

The rise of online trading

For the past few years, significant volatility in the FX market has made currency management a higher priority than before for many multinational corporations. With companies looking more closely at how they mitigate FX risk, the use of e-trading platforms has mushroomed. Corporations have gradually expanded the way in which they use this technology: whereas eight years ago companies used to talk about using e-channels for their smaller transactions only, today larger transactions are also being executed via e-platforms. Indeed, research published in 2011 by GreySpark Partners and Best Execution indicated that over 60% of FX deals are now conducted online – and predicted that this figure will reach 90% by 2014.

E-trading platforms offer a number of benefits over the conventional voice-based model, including faster execution speeds, lower transaction costs for FX providers and greater competition in the market as traders compete to offer the best prices. In addition, FX platforms are providing the industry with greater transparency of the flows going through the market. This increased visibility has given FX providers a better insight into how the market operates – which can lead to more effective risk management and ultimately to better prices for clients.

Meanwhile, the anticipated impact of recent regulatory initiatives has the potential to make electronic trading even more attractive to clients. “We are looking very closely at the regulatory developments and are very aware that they are likely to shape the services we offer; particularly in the clearing space”, says Rob Garwood, Head of FX Sales at Lloyds Bank Corporate Markets. “As regulatory changes become more transparent, they will be an important consideration as we continue to develop our service offering to all our client segments.”

Against this backdrop, the latest e-solution to come to market is Lloyds Bank Corporate Markets’ Arena. Launched in September 2011, Arena is an e-trading platform with a holistic attitude: in addition to FX and money market deal execution, the platform provides access to a wealth of Lloyds Bank Corporate Markets information, including proprietary economic research, market commentary, interactive charting and risk analytic toolkits. Reputable market data and live news are also being provided from well known third-party sources.

Development process

“Arena is aimed at our commercial, mid-market and major corporate clients as well as hedge funds, banks, central banks, asset managers, wealth managers, insurance companies and private equity fund managers,” says Garwood. Arena has been developed with a close eye on the needs of these diverse user groups. A crucial element of Arena’s development was a year- long consultation process, which included a series of workshops in which representatives from different client sectors discussed their requirements with the bank’s IT development, sales and marketing teams.

“I think those sessions were particularly useful because they became quite open forum discussions,” says Garwood. “Although many of our customers came in with preconceived ideas about what they needed, they left the discussions with a better idea of what they actually needed, because they were able to hear views from other companies in the same peer group. In essence, Arena is a product built by the customers for the customers.”

Features and functionalities

In catering for diverse client sectors, it is important to offer functionalities that will suit each of these sectors. The consultative workshops helped to identify the different needs and priorities of the different client segments. While all clients using the e-portal require access to prices and research, the ways in which these are used can vary considerably. Whereas a hedge fund might be primarily looking for fast prices, the corporate treasurer may prioritise economic research and risk analytics. Accordingly, Lloyds has focused on developing a solution which offers a wide range of tools, functionalities and information sources. The bank’s clients have the opportunity to customise their view of Arena on an individual basis by deciding what tools, modules and information they wish to access and how these will appear on their screen.

Some interesting tools and functionalities provided by Arena include:

• FX trading Arena allows users to trade in more than 50 currencies, from majors to a broad range of emerging markets. Spot, forwards, swaps and time options are available. Features include the automatic calculation of broken date FX trades and customisable dealing limits for users.
• Money markets Money market deposits can be placed in 19 currencies, with a range of tenors from one day to a year, and various settlement options are available.
• Trade blotter This tool allows clients to view the status of all trades conducted with Lloyds Bank Corporate Markets – including voice trades as well as trades executed through Arena. FX, interest rate, inflation and commodity trades can be viewed individually or on a consolidated basis and can be exported to Excel.
• Technical analysis Clients have access to a userfriendly system which draws upon real-time and historical data of up to ten years with direct access to the bank’s London-based technical analysis team.
• Price alerts Users can set up price alerts which appear as a pop-up. A significant number of currency pairs can be selected.
• Risk analytics These toolkits enable clients to tailor technical market analysis for foreign exchange and interest rates, covering for example volatility, spread, correlation and historical analysis.
• Economic research and insight Users of Arena can access reports, video briefings and updates provided by the respected Lloyds Bank Corporate Markets’ economics team, led by Trevor Williams, Chief Economist. This includes daily economic updates, monthly exchange rate and interest rate forecasts with detailed analysis of UK and global economic issues. Live news is also available from a well known third party.

Case study

Arena

Rob Garwood

Head of FX Sales

What were Lloyds Bank Corporate Markets’ goals in developing Arena?

Lloyds has provided foreign exchange e-commerce facilities for its corporate clients for many years now. We realised though that as our business grew our clients needed a more sophisticated platform that would cover a broader range of product areas. In that sense one of our aims was to bring as many client services into one venue as possible. Today, Arena is not just an FX execution platform but a tool for money markets, research, strategy and risk analytics and we are working hard to add further services by year end.

What are the advantages of coming to the market relatively late?

I think an advantage of developing a sophisticated platform now is that user requirements are much better defined today than they were five or six years ago. We have been able to bring an industry leading product to market in an incredibly short period of time. Our clients are more knowledgeable about what their real needs are and our system developers have been able to match those needs in an efficient and focused manner.

Which features of Arena are of the greatest interest for corporate treasurers?

Client needs do vary from one corporate to another. For instance, many of the major corporates we spoke to valued our economic research and our execution platform in equal measure. For mid-market and commercial clients execution mattered but was not as important as the risk management information and suite of risk analytic tools available through Arena today. The beauty of Arena is that the client is able to prioritise those interests so that their desktop view displays just the content they want to see.

Clients can also access Arena’s very user-friendly charting system for analysis of real-time and historical rates, or specific currency pairs, and of course there’s direct access to the expertise of the technical analysis team based in London. The corporates that we speak to are largely sterling-based and so will have a primary interest in our cable and euro/sterling views. Additionally, clients are not just looking at the currency markets today but also other asset classes such as gilts and equities, for example. So our technical analysis is useful as it covers all these product areas.

Meanwhile, our clients’ business, and therefore their exposures to emerging markets, have been increasing dramatically. We are therefore heavily focused on developing appropriate research, strategic idea generation, risk management information and pricing in this area. At the end of the day our aim is to match these services to the needs of our clients.

Given the time constraints experienced by corporate treasurers, is well-filtered information a particular priority for them?

Yes, absolutely. The filtering process is key and this is an area that we have worked hard on. The idea is that clients will be able to filter specific information, whether it’s at a specific currency or geographic-macroeconomic level, or by specific industry sector or asset class. We’ve arranged this so that at level one you are looking at pricing and general economic research; at level two you might be looking at another part of the site which would help the client generate ideas – for example, the risk analytics toolkits and customised economic research. Clients can use these resources to generate ideas about how to manage their own FX exposures more effectively. So the funnelling effect takes the client from the broad information set, narrowing down to the specifics that they wish to discuss – and they can communicate with us either using our chat facility or over the phone.

Future developments

Arena has been developed using a modular framework which is intended to make future development of the platform as straightforward as possible. “We’ve designed the platform to be modular so that in the future Lloyds Bank Corporate Markets can develop specific areas of Arena that are of particular interest to our clients,” comments Garwood. “Some areas need much more continuous investment than others – for instance pricing. Delivering a price sounds simple, but there are always demands on latency and on making the delivery of the price pre-trade, at-trade and post-trade as efficient as possible. The modular aspect allows us to look at price specifically so that we can be as efficient as possible when we transact with our clients.”

The recent release of Arena is just the first step in what promises to be an ambitious and versatile product. During the course of 2012, the transaction banking elements of the platform will be enhanced. Besides FX trading functionalities there are plans to offer Scottish Widows investment products on the platform and cash flow analysis and liquidity management features will be developed further. Additional asset classes including vanilla interest rate derivatives are also due to be included at a later date.

“In addition to FX trading, as the platform is developed further we aim to offer the full range of liquidity management products to our clients.” concludes Garwood. “Not many banks do this, which is surprising. Our aim has always been to bring client products and services into one venue.”

Are you seeing the views that matter?

More than an FX and money market deposits trading platform, Lloyds Bank Corporate Markets new e-solution Arena offers insight, analysis, reporting and trading – all in one single, customisable view.

There’s a wealth of research from our respected team of economists, so whether you need a better view of macroeconomic developments or a specific currency or sector, you’ll find the information you need. Live, streaming news feeds from well known third-party sources also brings you up-to-date market data.

With the capability to customise the Arena interface, you’ll only get the data you want and when you want it, so you’ll always get the best view of the markets you’re interested in. That doesn’t just apply to the market data and insight, but the display of the trading modules and other applications Arena offers, such as customisable rate alerts, a dynamic trade blotter, risk analytics and charting tools. Visit www.lbcmarena.com for more details.

Disclaimer

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Lloyds Bank Arena is a registered trademark of Lloyds TSB Bank plc. Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively.