New hedging tools for corps will test sales teams

One of the bigger shifts in the corporate foreign exchange space in recent years has been towards greater volume of smaller transactions. As corporates continue to cut out the middleman – say a bricks-and-mortar retailer – and sell direct to customers online, this generates thousands of small transactions which have FX exposures attached. 

This has triggered something of an arms race among banks to find ways of automating that flow. It’s not a new technology, but banks are increasingly competing to push a new breed of automated hedging tools that look to minimise human intervention in the process.

Five large dealers – Barclays, BNP Paribas, Citi, Deutsche Bank and NatWest Markets – already offer corporates the ability to automatically execute their FX hedges, with more banks working on similar projects. 

The offerings differ slightly between dealers: at its most advanced, a corporate could essentially plug in its risk system to a bank and let the dealer’s technology work out the best FX hedges to place and when.

Corporates have their doubts about whether they’re keen for such close integration – for some, it raises best execution and data privacy concerns. But banks are convinced that automation is the future, and that spells potentially big changes to the way bank sales teams are organised.

If more and more corporates are sending their flows directly to the bank, via these automated hedging tools or via electronic platforms, there is perhaps less need for execution salespeople to guide that flow, and some banks have reduced headcounts in these roles. 

Banks are convinced that automation is the future, and that spells potentially big changes to the way bank sales teams are organised

But with corporates needing help to connect to these trading platforms, or get their risk systems plugged into automated hedging tools, there is a growing need for e-solutions salespeople.

This role, of course, requires a very different skill set. For example, if a corporate was to plug their risk system into a bank to access an automated hedging tool, the client’s data would need to be cleaned first. This might require liaising with a third-party data-cleaning firm to sit in the middle to ensure the data arrives in a standardised and usable state. 

Some existing execution salespeople could perhaps make the jump across, but many may be unable to. Some banks have been looking outside of finance, such as hiring from technology companies, to bring in talent for these roles.

By their own admission, banks say the market is still somewhat far from achieving full automation. And for larger trades, it’s likely that these will still be executed via voice. But as times change, so must sales teams.