Best EM trading platform – Deutsche Bank

Deutsche Bank scoops the award for best emerging market trading platform for the first time, demonstrating a steely resilience during extreme market volatility thanks to a strong onshore presence and a successful restructure of its Asian business.

An unprecedented, challenging market environment proved to be the making of Deutsche Bank’s emerging market (EM) FX business in Asia. Despite volatile trading conditions the bank saw an increase in trading volumes during the first wave of Covid-19 in March and April 2020, which has enabled recent gains in market share across Asia. In the first quarter of 2021, the German bank moved up MarketAxess’ rankings on local markets in Asia to number four, up two spots from a year earlier. It is also ranked in the top five across major Asian markets for the Malaysian ringgit, Indian rupee, Thai baht, Singapore dollar and Korean won.

Ashok Das, managing director in fixed income and currencies at Deutsche Bank in Singapore, says: “Global corporate business profitability and cashflows have been under pressure from extended lockdown periods, but these unique circumstances provided our clients with an incentive to look for new ideas across operations and trade flows, as well as cost-saving measures.”

The bank’s trading platform, GEM Connect, has helped corporates tackle challenges across collections, payments, funding and FX in capital-restricted markets in Asia-Pacific (Apac). It links treasury processes into automated workflows, making it easier for the bank’s clients to move money to, from and across markets with capital restrictions via a rules-based FX execution tool and payment and hedge matching solution.

Earlier this year, Deutsche Bank closed the first onshore forward transaction with a Chinese corporate, which was an EM currency crossed with the Chinese renminbi. Deutsche hedged the South African rand back to Chinese renminbi instead of the US dollar, which helped the client manage its risk of trapped cash in South Africa, lower its hedging costs and match the hedging to the functional currency of its headquarters.

The bank’s extensive onshore and offshore presence helped it stand apart from its competitors, with FX and interest rates hedging tools spanning linear vanilla products including FX forwards, options and cross-currency swaps, as well as complex products and structures in almost all regions and local currencies in Asia. It also credits its win to a global integration of disparate EM businesses under a single management structure.

Ashok says: “We definitely have a much more co-ordinated approach across regions and various products. Deutsche is the first bank to offer clients access to tradable prices in many local Asian markets across multiple products outside of local trading hours. Utilising our US and Europe, Middle East and Africa-based trading hubs truly brings our global client base to the Apac region.”

The pandemic also accelerated the trend of greater flow automation, which Deutsche Bank fully embraced, says Ashok. “Gone are the days when you could have 100 coverage people picking up the phone and servicing clients for million-dollar tickets. A major enterprise for us has been to automate that flow as much as possible using our internal and external platforms.”

In addition, the current unpredictable macroeconomic landscape – exacerbated by factors such as disrupted supply chains and soaring commodity prices – has translated into greater trading activity from corporates and institutions. In countries such as Vietnam, Malaysia and Thailand, Deutsche Bank has seen an uptick in intercompany loan hedging, intercompany exposure hedging and finding local currency financing.

Ashok says: “More corporates are trying to make sure they don’t have too much open risk. If you have an investment in a country, you try to do as much financing in that country in the local currency as possible.

“Clients understand the issue of illiquidity in EM time zones and currencies, and so appreciate the ability of a bank like ours to underwrite market risk, whether it’s on illiquid currencies or illiquid tenors within the currencies, and being able to then offer them very long-dated hedges.”

This underwriting capability has helped Deutsche Bank move up the ranks in local markets such as Malaysia, where it ranks in the top three for FX forwards and top four in dynamic hedges.

The bank is now forging ahead with plans to become a top provider of derivatives linked to large-scale green financing deals such as wind farm projects in Taiwan. It sees this as an area of potential growth in Apac. The bank is breaking new ground with transactions such as the world’s first green hedge based on a specially designed green hedge framework, Asia’s first FX forward using environmental, social and governance performance targets and the first Panda Bond aligned with the UN Sustainable Development Goals.

Ashok says: “Clients can link their derivative to key performance indicators to get a performance-based incentive. We have won multiple awards across the region for these types of transactions.”

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