The Markets Conversations Podcast

Read time: 5 min        Added date: 25/04/2024

Insights from the trading floor

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A podcast series

The Markets Conversations is a monthly podcast, sharing insights from the trading floor, hosted by John Aaku, Director on the Corporate FX Sales desk. 

Each month John is joined by a markets specialist to uncover the latest trends and developments relevant to corporate and institutional treasurers. From bond markets to commodities, FX to interest rates, we highlight how we can support clients manage their risks.

For more information on products and services, visit our strategic banking services page.

 

Episode 2: A focus on Foreign Exchange (FX)

Sarika Jajoo, Head of E–Distribution within the Financial Markets division discuses the FX market including the team’s recent product enhancements, the benefits of API’s and how AI may have a role to play in the future of FX risk management.

Hear about FX insights

Read the interview:  A focus on Foreign Exchange (FX)

  • Sarika Jajoo, Head of E–Distribution within the Financial Markets division shares an update on the team’s recent product enhancements.

    “I think there are two main reasons driving our success. The first is all about how we’ve brought together our business and tech strategies to deliver innovation for our clients. Data, automation, and technology play such a crucial role in the FX value chain.

    We’ve invested in a multi-million-pound digital transformation programme to refresh our pricing, trading, and distribution tech stack. Placing our clients’ needs front and centre, we’ve aligned our strategic re-platforming roadmap to their priorities. We’ve centred our FX distribution strategy around meeting our clients where they are, on their platform of choice, leveraging APIs to achieve bespoke connectivity.

    Secondly, we’ve been heavily focussed on continually fine-tuning our auto-pricing and hedging capabilities. We are accessing a wider breadth of liquidity pools. We’ve also broadened our electronic product offering to cater to those clients seeking to place large orders with minimal market impact across a range of currency pairs.

    All these initiatives combined, have greatly improved the client experience, and helped us deepen our share of wallet, in what is an exceptionally competitive market. We look forward to taking this further as we continue to invest.“

  • An API stands for Application Programming Interface which is a technology that connects two applications together, enabling information to be exchanged between both parties. APIs are all around us and are essential to unlocking the friction that exists within a fragmented marketplace such as FX.

    What this means from an FX perspective, is that an API acts as a bridge between the client’s ecosystem and our FX pricing engine. It allows them to seamlessly integrate our pricing within their FX execution system, wherever their exposure rises, be it their Order management system, Treasury Management System, or Customer Relationship Management system.

  • Looking at a few examples; a corporate treasurer buying or selling goods in multiple countries with your suppliers or a currency broker with a high volume of international payments or a stockbroker with a few hundred equity transactions in foreign currency daily, these can all be complex processes to manage. They can also involve manual intervention and be prone to operational risk.

    It’s no surprise that our clients are keen to automate and simplify their workflows so that they can scale and future proof their business effectively. This is precisely why we’ve developed an FX API solution that can be embedded into a client’s front to back workflow, allowing them to receive dynamic FX prices and execute trades with us in real-time.

    Our cash management business has also built a complimentary suite of payment APIs. And we’ve had some very positive feedback from our clients on how our API solutions have helped clients improve operational efficiencies, reduce risk and save costs.

  • I’m really excited by the power of AI and I think risk management is well placed to lead on innovation that leverages this tech.

    Algorithmic trading is a great example of how the industry has evolved over time to intelligently match and automate order execution using algorithms, with human decision making still very much at the core of driving the algo execution.

    Banks operate within risk frameworks, with large, structured data sets and rules-based pricing models that are wrapped with safeguarding controls, this is all fertile ground that AI can build on. 

    Just as one example, AI can be used to analyse vast amounts of tick data speedily to identify patterns and generate actionable predictive insights. This can further help optimize trading strategies to dynamically adapt to market conditions and signals. However, human oversight remains critical to any innovation to ensure we maintain responsibility and control, every step of the way.

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Accessing International Bond Markets

Hear why the start of 2024 in the primary markets has been busy and why UK borrowers are choosing to access US dollar markets. Keval Shah, Global Head of Bond Syndication and Wes Fallan, Head of US Capital Markets talk about accessing international bond markets.

Listen to the five-minute audio

Read the interview:  Accessing International Bond Markets

  • One of the main reasons we've been particularly busy this year has been the rally in rates at the back end of last year, particularly through middle of November, December and equally the credit spreads rallied into the close of the year.

    That made levels, be it yield or spreads very attractive for borrowers. And so, I think a number of issuers, that accelerated their plans of issuance, certainly for Q1 or Q2 into trying to get ahead to take advantage of that rally by getting in ahead of close periods, before year end results. 

    For us, across the board be it in sterling, euros or dollars, in all markets, we've seen some very successful placement and its very encouraging for the rest of this quarter and the first half of this year.

  • In addition to our domestic US clients having dollar needs, our UK clients will also tend to access markets away from sterling and euro. As part of the ongoing coverage effort of the global issuer clients, we track, among other things the relative value or cost associated with issuing in all currencies.

    And ultimately, we like to be in a position where we are then offering bespoke, currency agnostic advice to our clients which is backed up by proven credentials in each market. The desire to support these clients across a full  spectrum of products and currencies was the driving force behind setting up Lloyds Broker Dealer, Lloyds Securities, based in New York.

  • In Europe, in a similar manner, we're always looking to optimise financing proposals for borrowers, be it in Euros or Sterling. We have LBCMW, our European Broker Dealer to access those European investors.

    Given the different needs of investors, we've been able to offer various multi-currency  solutions to our UK borrowers where they are able to take advantage of the longer end of the Sterling curve, but equally, the shorter end of the Euro curve to get very attractive financing.

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