5 mins

Empowering a competitive advantage in foreign exchange trading

A use case scenario for Global Financial Trading Solutions

The Challenge

The FX market has changed dramatically over the last five years. The growth of Platform-as-a-Service (PaaS) providers has enabled new FX broker-dealers to go head-to-head with the large established institutions. FinTech developments, particularly in trading technology, have also enabled firms to access better quality data and analytics, and capitalise on arbitrage opportunities through faster trades. Greater competition has driven down margins and focused growth on emerging markets.

The bank’s reliance on legacy systems meant it was unable to respond as quickly to the changes in the market as its competitors. The bank’s traditional competitors had invested in IT and infrastructure upgrades to let them execute trades faster, especially in algorithmic high frequency trading teams, and move quickly into new markets to generate new business. Agile new competitors now use the latest in cloud and FinTech solutions to provide more cost-effective broking services to clients.

Caught between the rise in competition from new players, and traditional competitors’ growing capabilities, the bank’s management started to notice signs that the bottom line of its FX business was getting affected. Microseconds matter in trading, and the firm’s reliance on existing IT systems put it at a distinct disadvantage. The bank’s restructuring, including a strategic withdrawal from other asset classes, had placed added pressure on the FX business to grow its profits.

The Solution

In response to these challenges, the bank implemented a strategy to maintain and strengthen its position as a leading FX broker-dealer firm. The strategy was founded on three elements: increase its speed of doing business; expand into emerging markets; and drive cost-efficiencies within the FX business to make it more profitable.

The bank set about to engage a vendor to offer network and managed solutions, to help it achieve its strategic objectives. It picked Telstra for offering the combination of best-in-class latency from high-capacity networks, managed solutions and technologies from a range of leading technology vendors (such as Equinix, EMC and Cisco curated specifically for global financial trading firms), and always-on support delivered by experienced financial services specialists.

To address the need for faster trading speeds, Telstra implemented an Ethernet Private Line Express service to deliver the lowest latency connectivity between Asia Pacific, Europe and the USA. Optical Transport Networking technology powers data traffic of up to 100Gbps, enabling the rapid transmission and analysis of large complex data sets to enable more informed trading decisions.

The bank complemented its network infrastructure upgrade by adopting a range of Telstra’s managed services and platforms. A managed hosting service provides server infrastructure at stock exchanges in global financial hubs to speed up trading times. Electronic trading technology offers broker and venue connectivity with delivery of market data at ultra-low latency, and application hosting as a single bundled service. The bank also adopted Telstra Trader Voice, which is an intelligent IP-based voice trading platform that uses software to turret, as well as dealer board technology. This increases trader productivity and workforce flexibility, while meeting regulatory compliance requirements.

Telstra’s managed cloud empowers the bank to source the latest in financial services applications, and offer new services to its clients. Data centre colocation enables the bank to meet regulatory and data sovereignty requirements without having to invest significant resources in setting up and managing proprietary data centres in every jurisdiction it operates.

The Benefits

The bank’s traders immediately benefit from faster data flows through their trading platforms, empowering decision-making with up-to-the-second market information and the ability to execute trades quicker than ever before. Using Telstra Trader Voice and Managed Cloud services, the bank has grown its operations in emerging markets with ease. It now manages new sites from its London headquarters, which reduces the need to second staff and lowers the cost of new operations.

Delivered as an end-to-end service through a single technology provider, Telstra’s Global Financial Trading Solutions helps the bank reduce its IT complexity, enabling it to focus on trading strategies and revenue growth. Costs are shifted from CapEx to OpEx, which reduces assets on the balance sheet and frees up capital for other business priorities.

The solutions help the bank to increase trading profitability and client commissions. As the bank benefits from lower operating costs, a stronger balance sheet, and a growing customer base in new markets, it has strengthened its global position as one of the leading FX trading businesses.