RBS proves its operational mettle throughout 2016

Turbulent market conditions are not only taxing for traders and risk managers, but are also a test of operational resilience on the post-trade side. In an increasingly electronic world, banks and their systems are exposed to huge trade volumes and high-frequency trading – an activity that needs to be efficiently mirrored in post-trade processes.

"We've had a couple of very interesting market events with Brexit and the recent flash crash, and I'm pleased that, operationally, we have performed solidly throughout this volatility. We came through both of those events with flying colours, particularly on the operations side," says Simon Manwaring, head of currencies trading at RBS, the winner in the Best Bank for FX Post-Trade Services category at the 2016 FX Week Best Banks Awards.

The Swiss National Bank-triggered move in EUR/CHF in January 2015 was a wake-up call for all segments of the market, hammering home the fact that just because something is considered almost impossible, it can still happen.

If something can happen once, it can happen again, so it is important to have your controls environment calibrated accordingly, to take account of such situations
Simon Manwaring, UBS

"We've almost never seen a 20% move in FX, apart from in the most illiquid emerging market (EM) currencies, and so to see it in a currency as heavily traded as the Swiss franc gave people pause for thought," Manwaring says. "If something can happen once, it can happen again, so it is important to have your controls environment calibrated accordingly, to take account of such situations."

After the trials and tribulations of 2015, this year has felt a lot more business-as-usual for FX, even as Brexit and the US presidential election wreaked havoc in markets.

Trump expectations

"The FX market reaction to the [Donald] Trump victory was in line with our expectations. Volumes in the early hours were about five times what we would normally expect in a normal Asia session, with a greater-than-usual emphasis on EM pairs. Operationally, we encountered no problems, and pricing and order-taking activities took place as normal for all of our clients," Manwaring says.

One of RBS's advantages is that it has finished building out systems in anticipation of new capital rules, which leaves the bank in a good position to negotiate collateral and margin rules.

"There is a huge amount of client engagement around regulation at RBS, and clients really appreciate this. I think we were able to differentiate ourselves with the more active engagement, as well as operational excellence," Manwaring notes.

"The base case is that 2017 will be pretty similar to this year in volume terms. Non-bank liquidity providers stepping in to provide liquidity to the market is taking place slowly, and it looks like it will be quite a long time before they are fully able to fill any liquidity gaps left by banks," he adds.

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