Scandies are all about getting the balance right, Danske says
Danske Bank scoops Best Bank for Scandinavian Currencies at the 2016 FX Week Best Banks Awards
Executing well in Scandinavian currencies requires a certain amount of deftness. The sourcing of liquidity in the currencies of Europe's northern shores is an exercise in dexterity, which must be balanced between various execution methods, be they algorithms, electronic or voice execution. This is an equation Danske Bank has perfected over the years.
"The challenge up here in Scandinavia is being able to find the right model of execution," says Karl Niklas Karlsson, global head of currencies and commodities at Danske Bank. "Liquidity in Scandies is not that easy to execute entirely via algos, so the challenge is to find the right combination for our clients between electronic trading, algo trading and voice trading."
"Telling our clients to sweep the market for Scandies would invariably lead to bad execution. When trading Scandies, execution needs to be more balanced to get a better result," he adds.
To achieve these results, the Danish bank has invested in an electronic-trading platform called OneTrader. But, when it came to algorithms, the bank decided it would make little sense to invest in a full set of them, thinking a targeted set would best serve the needs of its clients.
Several years ago, Danske Bank, the winner in the Best Bank for Scandinavian Currencies category at the 2016 FX Week Best Banks Awards, decided to change tack and stop quoting all currency pairs for the sake of it. Instead, it resolved to focus its attention unambiguously on what it does best: Scandies.
The key is to know which providers actually add liquidity, and which ones are just followers and don't add anything real to the market
Karl Niklas Karlsson, Danske Bank
Today, three-quarters of the bank's FX business involves one leg in one of the three main Scandinavian currencies – the Swedish, Danish and Norwegian crowns – with that figure rising to nearly 100% for asset managers and corporates, as they almost always have a Scandie leg in their currency exposure.
"For our clients such as corporates, asset managers and hedge funds, we provide a wide range of instruments if it makes sense," explains Karlsson. "But because of capital consumption, we don't do that on a bank-to-bank business anymore. We don't provide a wide range of products for banks unless there is a Scandie leg."
While competition in market-making is on the rise, with non-bank liquidity providers making some inroads in the Scandies space, Karlsson says such providers are never there when volatility picks up.
"I'm not against non-bank liquidity, but the key is to know which providers actually add liquidity, and which ones are just followers and don't add anything real to the market. It's a new phenomenon and maybe it will get better with time. As long as it's regulated, I'm all for it," he adds.
Click for editor's introduction, list of interviews and awards tables
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact customer services - www.fx-markets.com/static/contact-us, or view our subscription options here: https://subscriptions.fx-markets.com/subscribe
You are currently unable to print this content. Please contact customer services - www.fx-markets.com/static/contact-us to find out more.
You are currently unable to copy this content. Please contact info@fx-markets.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@fx-markets.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@fx-markets.com
More on Awards
Asia FX Awards 2024: The winners
The FX Markets Asia FX Awards present 43 categories, determined by an esteemed judging panel comprising industry experts and FX professionals across Apac. They have paid attention to firms that brought unique and innovative ways to fulfil industry needs…
Best blockchain technology service provider: Talos
By building a robust ecosystem with a blueprint based on traditional asset classes, Talos has attracted a network of the most important institutional players to its digital asset trading platform
HSBC wins six Apac FX house of the year awards
With one of the strongest footprints in the Asia-Pacific region (Apac), HSBC provides international clients with an extensive local FX franchise while facilitating local clients’ access to international markets
Best FX prime broker and Best compression/optimisation service for FX: HSBC
With one of the largest FX networks worldwide – and strong coverage in Asia and other emerging markets – HSBC’s FX prime brokerage remains a strategic partner to key financial institutions
Best aggregator and Best FX analytics provider: oneZero
oneZero continues its rapid growth as FX brokers, banks and non-banks in Asia and beyond benefit from the advanced features its multi-asset trading and analytics technology provide
Firms seek optimisation gains as UMR and SA-CCR bite
A wider range of market participants is taking advantage of service providers such as OSTTRA’s optimisation cycles to drive margin and counterparty credit risk efficiencies across asset classes including FX, rates, equities, commodities and credit
Best FX overlay manager: State Street
In the most challenging market environment in many years, demand for State Street’s currency management offering spiked in 2022 as market participants sought assistance in minimising their FX risk and optimising their hedging activities
Best settlement initiative: CLS
Created 20 years ago to mitigate FX settlement risk, CLS continues to lead the settlement sphere with new solutions designed to meet the challenges of an ever-evolving FX market