Best prime broker and Best single-dealer platform: UBS

 

After successfully guiding its clients through some of the most critical times of the Covid-19-pandemic-induced disruption in 2020, the waning dislocation and the return of relative stability to FX markets in 2021 allowed UBS to shift its attention from purely keeping the FX liquidity taps open to making significant investments designed to enhance the efficiency and user experience on its Neo single-dealer platform.

In many ways, the improvements made to Neo in 2021 were natural extensions to the changes brought about during the disruptions of 2020 when UBS increased the means through which its clients could access the banks’ trading platforms regardless of where they might be trading from. The new enhancements sought to enhance these changes and harmonise clients’ user experience irrespective of the platform chosen – desktop, mobile or browser – to access trading services.

“The key for UBS is to make sure that all of these access points provide clients with the same experience and access to all products so they can trade whatever service from wherever,” explains Sandeep Kakani, product lead for principal flow client and trading apps at UBS. “We invested massively into technology and upgraded our desktop, browser and mobile apps with as little disruption as possible in the migration of clients to these services.”

Some of these upgrades – such as the roll out of T-Pricer FX for options and structured products – were highly visible for clients, while others – such as the shift to HTML 5 across all platforms – were imperceptible in nature.

UBS took the opportunity of the single-dealer platform’s overhaul to bring all FX services under one roof, part and parcel of UBS’s one-bank approach to make Neo the focal point for everything FX at the bank. As the centre of its FX ecosystem, UBS has worked diligently to enhance Neo’s capabilities and create an environment in which clients can access markets as efficiently as possible across jurisdictions, products and services.

“A key aspect of UBS’s success is the one-bank approach,” says Stephan Hoeger, global head of e-FX sales at UBS. “There may be different departments or organisational setups with information barriers between different sides of the business at the bank, but ultimately we all follow the same North Star of delivering what our clients want.”

To this end, he explains, the bank is increasingly leveraging technology and intellectual property between different departments so as to share know-how and applications already in use at the bank for various client segments or services, with the added benefit of reducing IT development costs.

A prime example of intellectual property sharing, and consistency and unity of service is UBS’s decision in 2021 to more closely integrate its FX prime brokerage (FXPB) services with the rest of the bank’s FX franchise by onboarding it to the Neo platform.

“The integration of our FXPB client-facing technology into the Neo platform was a strategic IT investment upgrade designed to enhance the client experience and provide clients with a single interface for anything that’s FX at UBS,” explains Ryan Connolly, global head of FX prime brokerage at UBS.

“It builds upon the already strong synergies we have with the UBS FX franchise, and it also demonstrates our commitment and investment into our clients and FXPB business. Coupled with consistency of service and price – especially during ever-changing market environments – these are some of the most important hallmarks of a successful FXPB franchise. Our FXPB business is also strategically well positioned because it sits alongside our equity prime brokerage, futures clearing, and over-the-counter clearing businesses, which enables us to offer a full service offering to our clients across products.”

Perhaps more important is the central position UBS occupies within the FXPB space. Operating uninterrupted since 2001, UBS’s FXPB is one of the oldest FXPB franchises in the market today, which, given the significant disruption in FXPB and pullback from some players over 20 years, makes UBS stand out as a secure credit intermediary. Connolly is adamant that the key to the franchise’s longevity is the consistency the prime broker takes to maintain the business on course through all market conditions and regulatory changes.

“The commitment and consistency of an FXPB is very relevant,” he says. “We haven’t altered the business significantly or changed the way we run things. As their central credit counterparty to the market, clients want to know their prime brokerage will be there come what may, and that they won’t suddenly close the credit lines or move the goalposts on them. I think this resonates well with clients.”

Yet, UBS’s FXPB has evolved in recent years. In contrast to some competitors that have restricted their prime brokerage client base over the years, UBS has actually expanded and diversified the type of market participants it serves. Whereas, traditionally, the bread and butter of UBS’s FXPB franchise was largely composed of hedge funds, the bank has broadened its franchise to serve retail aggregators, prime-of-primes, asset managers, banks, family offices, non-bank market-makers, and even electronic communication networks on the central clearing business side.

And, as regulatory and other forces exert pressure on the FX industry – most recently with the uncleared margin rules and standardised approach for counterparty credit risk, among others – UBS’s FXPB has introduced non-deliverable forward (NDF) clearing, trade compression – both bank and client side – and trade optimisation to reduce counterparty exposure. UBS has also added client-side enhancements, including pre-trade credit checking solutions, collateral optimisation solutions, and client-to-client trading to cater for the increasing number of clients wishing to trade with each other on the platform.

“We’ve done a lot to implement solutions over the years to help future-proof the business that benefit both us and our clients,” says Connolly. “Now that prime brokerage is integrated into Neo, we’re looking at how we can leverage that functionality to other clients that are not FXPB clients.”

Streaming swaps and emerging markets NDFs

UBS has also made some upgrades on the FX instruments front on Neo. Clients can now trade FX swaps on a click-and-deal basis in real time via streaming feeds that are available 24 hours a day, five-and-a-half days a week – a major development for the UBS FX franchise, as elsewhere in the industry the instrument remains largely traded on a request for quote or request for stream basis.

In 2021, UBS also invested heavily in its emerging markets FX franchise. The bank significantly enhanced client connectivity to these currencies to make them available to trade electronically, either as spot deliverables or NDFs. UBS has thus added a set of new emerging and frontier market currencies for electronic trading, including the Tunisian dinar, Moroccan dirham, Egyptian pound, Qatari riyal, Omani rial and Kazakhstani tenge. And, for the more widely traded deliverable currencies – such as the Mexican peso and the offshore Chinese renminbi – UBS has increased the maximum trade size available on a click-and-deal basis to between $100 million and $300 million, depending on the currency.

“We are proud to be one of the largest electronic emerging markets FX and NDF market-makers now,” says Hoeger. “In 2021 we saw yet again with currencies like the Turkish lira how important it is to provide liquidity at all times to help our clients manage their risk. Through our deep understanding of emerging markets in different market conditions, we can identify and remain focused on helping our clients to access the best liquidity in those currencies.”

UBS was voted Best prime broker and Best single-dealer platform at the 2022 FX Markets e-FX Awards.

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