4. What FX products are most important in your market or geography?
In terms of most important products, spot is still king: 25% of respondents cite it as the most important product, echoing the finds of the BIS report. This is followed by forwards and options in joint second place, cited by 19.64% of banks in the survey.
Outside of the traditional FX products, though, other derivatives are seen as crucial to service provision. “Derivatives are still a key driver of our business both on the product side – creating innovative and tailor-made offerings for our clients – and on the geography side – with derivatives developments in emerging and highly regulated markets,” says Henri Foch, global head of FX trading at BNP Paribas.
At Commerzbank, Mr Hoffmann says that options and structured products are rising on the client agenda. This is partly driven by the new international accounting regulations, he says. “The most important products in our region are still simple spot and forward transactions, purely for liquidity reasons. But for corporate and institutional clients, options and structured solutions that can be applied under IAS hedge accounting rules are becoming more and more important – and increasingly in emerging market currency pairs.”
The increasing activity in and exposure to emerging market countries is also pushing clients towards greater use of derivatives. “Derivative products and insight into emerging market currencies [are the most important]. Because of the increasing importance of and interest in emerging market currencies, finding creative ways to hedge currency risk will continue to be hugely important to our clients,” says RBC’s Mr Henderson.
The emerging markets are also shaping product sets at JPMorgan. “Macro themes in emerging market Europe and Asia have increased volumes in spot and options in these currencies, [but] bespoke basket options in emerging market and high yield currencies are increasingly a bigger part of the business,” says Mr Rawlins.
