Commerzbank, which is renowned for its strong European footprint, goes the extra mile on behalf of its clients. “Just as with any team, you are only as strong as your weakest link. Strong collaboration and shared goals are very important,” says Gerald Dannhaeuser, Head of Global FX Sales at Commerzbank Corporates & Markets.
In an industry where the regulatory framework and client requirements are all constantly changing, the bank’s Global Head of Local Markets Trading, Abnash Grewal, who deals exclusively with non-G10 FX currency pairs, comments: “The landscape is changing, and we want to play a role in it. We have a sophisticated product range and service offering that clients can have a real direct use for, be it pricing, liquidity or research. It’s all about understanding the needs of clients and being able to facilitate this through any market transformation.”
Market overhaul
Banking products are undergoing fundamental changes as new regulation sweeps in following the passing of the Dodd-Frank Wall Street Reform. The market transformation is highly prevalent in the forex market which, with average daily turnover of $4trn according to figures from the Bank for International Settlements, is one of the largest in the world. Commerzbank’s commitment, transaction volume, market share, service and innovation in this substantial market has been recognised again, for the second year running by European CEO magazine. Grewal notes: “I believe that our client-centric model will help us weather the changes; the need to provide currencies to our clients isn’t going away. But, the world is changing and so are our customers. We’ve recently made some futher enhancements to our award-winning eplatform, Click&Trade FX, so CEE currencies are better managed and are essentially providing clients with tighter spreads.”
Commerzbank currently offers over 150 currency pairs to its customers and is always looking at ways to strengthen its product range, and recently included CNH. The CNH is traded in Hong Kong as a freely convertible currency on the interbank market. With a three-decade presence in China, the bank is experienced on market rules and particularities in the region. This will greatly benefit its European clients as closer links between the two continents are established.
Commerzbank took over fellow German competitor Dresdner Bank in May 2009 and has been able to use this union to the advantage of its clients. While the former presented a large corporate expertise, the latter brought greater experience with institutional investors. It was the amalgamation of the two which cemented Commerzbank’s position as market leader in Germany.
Client needs in a changing market
The bank persistently strives to stay on top of current trends that are transforming the FX market. Customers are particularly interested in how the market will develop and which strategies are recommended in these developments. “Our investor solutions conferences are an invaluable platform for providing insights into market trends,” Grewal says.
While the bank is interested in strengthening its key relationships in Asia and the US, it is also keen to further reach clients closer to its home market, organising several seminars and roadshows in the CEE region. The investment bank has also partnered with BRE Bank, the part-owned Commerzbank subsidary in Poland, providing the bank with an opportunity to raise awareness of market news and legal changes. “Our seminars have provided us with a platform to show clients what we are capable of. We will talk them through solutions available in the FX markets, give feedback about legal developments and how these affect the market, along with discussing long-term and short-term hedging and financing strategies,” according to Grewal.
“To ensure we remain in a position to fully comprehend the needs of our clients, constant communication is required. Clients want a transparent approach; they are much more mindful of the future and want to know where the market will take them. The FX team is available around the clock, providing access whatever the time, whatever the location; we run a 24 hour book,” he adds.
Dannhaeuser, who oversees global FX sales and product coordination, provides clients with a product offering that suits them, says: “It is my job to take a measure of market conditions and find out what clients will require today and in the future. The FX business will always have its cycles but we need to have a constant dialogue with clients because we are seeing much more volatility than before, and we need to respond quickly to market moves.”
Technology advancements
Only a decade ago trading foreign exchange was a fairly simple matter. A market participate might call a few dealers for a quote via telephone or on the Reuters dealing platform and send requests for quotes whenever they wanted to trade currencies.
But access to foreign exchange markets has changed fundamentally since then. There is now a wide array of electronic techniques available to institutional investors for identifying and executing trading opportunities, such as algorithmic trading. Additionally, electronic trading is changing the structure of the FX market by lowering transaction costs and raising market liquidity. A further benefit is that it allows the non-stop streaming of currency data and prices.
Dannhaeuser believes that technology trends are heavily shaping the next generation of financial services delivery. Commerzbank was one of the first to develop and provide a proprietary online FX platform: Click&Trade FX. Building on and making use of the most up-to-date technology is one of the bank’s key criteria. “It’s now possible to trade all kinds of linear and non-linear FX products electronically; this has dramatically changed the available offerings for our clients. But still clients utilise and value their trusted bank contact, who can talk through the available products and give superior advice in term of liquidity, market depth, efficient execution or outperforming risk management solutions,” he says.
Liquidity aware
However, Grewal knows that electronic platforms are only as good as the people behind them. Utilising the latest technology will not benefit clients unless the right team and products are available on the platforms. “Fortunately, at Commerzbank we constantly strive to add more currency pairs, and are regularly increasing our offering across the FX spectrum, while simultaneously keeping an eye on liquidity so our clients can access what they need.”
Staying aware of potential market risks and the ability to be a strong partner to its clients is of paramount importance to Commerzbank. “Liquidity is not always a given. The fact is you only notice liquidity when it is not there. Banks need to be up-to-speed and it becomes especially relevant as the market progresses and people show an increasing interest in trading emerging currencies,” Dannhaeuser says. “You cannot be a fair weather bank. Of course it is easy enough when times are good, but we must also deliver in tough times too,” Grewal points out.