Choosing a Multi-product Platform – Voices from the buy-side

Most large and mid-size corporates definitely have more than just three bank relationships. In a time where treasuries are working hard to constantly leverage their process efficiency through integrated infrastructures and STP it would almost seem absurd for them to maintain several proprietary trading systems from different banks, creating the need for several screens, interfaces, training systems, frequent updates etc.

If you have 20 banking relationships there are no efficiencies in using single bank platforms”, says Carolin Billetter, member of the group treasury at Deutsche Telekom, a client of 360T.

Yet, the same logic that applies to bundling several bank relationships on a multibank platform also applies to the number of financial instruments that are accessible through such a platform.

While other demand-side profiles, like large institutionals, request mostly vanilla FX products, a corporate treasury will also be likely to have a strong demand in money market products.
Depending on their underlying core business, risk appetite and professionalism, they will additionally be trading interest rate derivatives, commercial paper or bonds, and even commodities.

We selected 360T for being a multibank platform that offered the trading of money market products, when we went through the evaluation process of which portal would fit our demand profile best. We are also looking forward to trading commercial paper via 360T” explains Billetter.

Axel Tillmann, Vice President Treasury of Deutsche Lufthansa, another 360T client, explains that “Other platforms concentrate on FX trading,” which was probably one of the key reasons for their decision to go with the 360T platform.

Torsten Kohrs, deputy treasurer at Lufthansa adds that,“360T introduced us to the idea of a multibank platform with multi-product trading capabilities. We are now transacting close to 90% of our monthly volumes in unstructured products, including FX, money market and IRDs, via 360T.”

Another 360T client, Infineon Technologies also wanted to improve the time consuming pricing part of the dealing process, as well as combine a multi-product solution and an automated link (STP) to their Trading System.

Our decision to go with 360T as a full solution provider and a multi bank platform was the logical result.” Says Thomas Seidel, Senior Director Treasury, at the company.

Formerly, the instant availability of all their partner banks on the platform used to be a “make-or-break” criterion for many corporate treasuries.

However, Christoph Perger of 360T says “Taking liquidity as a primary indicator of the quality and strength of a brand in this segment is misleading, because it neglects the strong dependency of the model on reliability and flexibility of the underlying technology.”

Having grown more confident with the topic and having learned from the lessons of the past, an increasing number of corporate treasuries approach their selection process the opposite way and prefer a reliable technology partnership to a complete list of providers. Lufthansa, for example, does not find all their current partner banks on the platform.
However, Tillmann states, “We will try to participate in winning the banks of our choice as liquidity providers for the platform”.

An important consideration is the effect of online trading on the quality of the relationship between corporates and banks. It seems that corporate treasurers are not as concerned about alienation with their banks, especially not in the case of research and advice. Although Carolin Billetter admits that their general level of interaction has decreased since using 360T, she views this to be rather advantageous, “Because we no longer have to speak to as many banks about unnecessary issues”.

Regarding the hybrid model of maintaining individual bank relationships while using a portal, Billetter explains that they maintain a dialogue with some banks on a frequent basis. However, she points out that she prefers to maintain such relationships on the telephone for more complex themes, whilst trading plain vanilla business over the portal. Regarding the extensive market research that some portals offer, Billetter also has a very clear opinion. “We have no need for additional news, charts or research, as we receive a large amount of pinpointed information from services we subscribe to.”

She adds that she “would rather call a bank and have a focused conversation over the latest research than having to read through all of it on a website.”

Billetter explains that Deutsche Telekom is likely to assess the value of integrating with 360T soon, but that currently no interface exists. “We will take a decision about whether it’s currently worth those efforts for STP. At present though it’s no problem for us to input deals twice as the deal input process is very simple”

Torsten Kohrs believes that autodealing will become a necessity at the end of the day because it is not just a saving for the client. Just as one dealer at the client can ask multiple banks prices simultaneously, so a bank is receiving many more requests for quotes. Unless the bank is willing to employ many more dealers, auto-pricing is a requirement.

He goes on to say: “Both sides I think, realise the benefits that auto-dealing brings to their relationship. Banks benefit by pushing low margin business through auto-trading so they can concentrate on the value added business such as options and strategy. This holds true for clients as well and I think auto-trading will strengthen these relationships rather than weaken them”

So what are the benefits we have seen so far:?
Lufthansa estimate that their workload reduction is a conservative 50%. They have reduced the number of dealers which used to execute trades. They call at least two or three banks per deal, and now one dealer – working with the system - can fulfil the task of three or more. That means an optimisation of resource allocation, and those dealers no longer executing are now able to concentrate on strategy.

To Deutsche Telekom, the biggest benefit from online execution has been time efficiency. The company can, says Billetter, address several banks at one time and, therefore, save time by doing daily business much quicker, especially when the treasury operation has to prove best execution.

She uses the money market as an example, explaining, ”Money market transactions are very straightforward and we carry them out every day. However, they are time-consuming. By using the 360T system to execute these transactions we have been able to create much more free time to concentrate on other more pressing issues facing our trading team”

The 360T system divides into an external and a group-internal trading platform. The external platform, TEX Multidealer Trading System, is a portal where the participating corporate treasury can conduct online multibank requests, execute the preferred quotes and receive an electronic deal notification. A unique feature is the so called “competitive bidding mode”, which the treasurer can select and enable the quoting banks to see competitive quotes on anonymus basis. Since Lufthansa asked 360T to built an electronic interface for a full integration with their existing treasury management system, the deal notifications are automatically routed into the Sungard GTM position keeping.

I-TEX Intra-Group Trading System, which is the company-internal solution of 360T, is a web-based platform with an implementation effort of only minutes in any remote location. Lufthansa already has three subsidiaries online and is ready to hook up the fourth.

The internal customers can request financial instruments electronically from the group treasury. However, the system supports different ways of responding to these requests either manually or via autotrader with internal pricing or even with an automated market link back-to-back with the partnership banks of the group treasury. The group treasurer can configure different levels of intervention or automation according to individual subsidiaries, currency couples, notionals and other parameters of differentiation. In the fully autodealing mode with market link, i.e. for predefinded standard transactions, two tickets are created automatically between subsidiary and group, and between group and bank. Again all confirmations go straight through into Lufthansa’s Sungard GTM.