FX-as-a-Service
Posted by Colin Lambert. Last updated: April 22, 2025
By Aled Basey, Head of HausFX & FX Execution Advisory, UK, Deutsche Bank
- What is it?
FX-as-a-Service will mean different things to different people, as automation solutions are user and institutionally specific. To cater for this, it requires the technology to be able to manage each and every stage of the FX trade lifecycle, from calculation through to settlement, delivered to clients in a transparent and operationally robust way.
At Deutsche Bank, the workflow automation technology suite is called HausFX. Its modular design allows clients to target the specific workflows they want to enhance with HausFX solutions.
2. Why now?
There are a combination of ‘push’ and ‘pull’ factors for the FX market as a whole, as to why this is the right time.
In terms of ‘push’ the buyside management fee compression drives the need to improve efficiency and optimise their existing workflows. Couple that with increased regulatory headwinds and the need for operational resilience. Then there is the realisation that for the majority of FX participants, their FX is not being traded for alpha. For those instances where they are taking an active view, our execution advisory team has been set up to help optimise their execution tools and decisions. However, FX for a non-FX PM is largely a by-product, almost a referee within a football match – the best performance is not knowing they are there at all. There have been a few articles recently discussing market structure, the ever-increasing number of venues resulting in increased fragmentation, driving up the cost of running an FX business.1
A key ‘pull’ factor is how electronic the FX market is, which provides the foundations needed for clients to leverage their data and the electronic execution network to automate and optimise their executions in a smart way. Utilising technology to drive efficiency becomes the obvious choice. By inserting tech-first solutions, the ingredients are right for rapid and sustained scale, removing the historic barriers to progress from incumbent solutions. Another pull factor is certainly the speed at which restricted markets are evolving, improving market access and increasing transparency and supporting efficiency for the market in general.
3. Who – buyside/sellside
Different client types, have different specific challenges, meaning no single solution solves all problems. What is required is a technology suite that is both flexible and scalable, such that it can fit within the client’s existing workflow to ensure no additional point of failure. We’re very fortunate to have that available to us within HausFX.
On the sell-side, regional champions are looking to offer best-in-class solutions to their clients but face the same regulatory burdens as larger peers. Margins continue to erode, increasing the focus on cost optimisation by either: reduce trading costs or reduce operational and/or technology costs. HausFX looks to partner with clients to address their specific challenges, helping them achieve those goals. This results in reframing their relationship with Deutsche Bank from pure Liquidity Provider to Technology Partner. If there is an overarching theme, it would be that clients are looking to double down on their own areas of strength but then look to partner for scale in areas which are extremely competitive.
On the buy-side, there are a plethora of different potential use cases. Anything manual, repetitive and non-alpha generative is typically ripe for automation and the benefits of the operational risk reduction that brings. It can be as easy as a workflow for security-linked FX, all the way through to a sophisticated hedging programme. It sounds obvious, but the key to selling any technology is to listen to clients, solve for their needs and keep iterating the product.
The return of the higher volatility environment has certainly sharpened focus on any legacy workflows clients may have in place, for example we’ve recently heard from equity asset managers who have historically opted to hedge their FX daily to attempt to maximise their netting, only to now see their performance eroded by the delay to the execution time – prompting the desire for a new technology solution. That’s really where our HausFX product suite can be deployed, its dynamic automation is well suited to tailor hedging methodology depending on the environment – so those equity funds could have switched onto different hedging profile, to avoid any long delays to execution.
4. Considerations
For any clients reviewing their FX business, across buy or sell side, we’d encourage them to get in touch. We have been through many different scenarios with different client types, that it makes sense to put heads together and collaborate – of course, if we can help solve a problem then great, but if nothing else we look to leave all our clients and prospects with the ability to make more informed decisions on what the right execution process should look like for their FX business.
The_Brilliant_World_of_FX_-_A_Primer.PDF
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