Survey reveals Asian treasurers' penchant for single-dealer platforms

Corporate treasurers in Asia are avid users of single-dealer platforms compared with their compatriots in other parts of the world, a new survey by Bank of America Merrill Lynch (BAML) shows.

While only half of the nearly 1,500 treasurers surveyed said they handled FX operations electronically, 70% in that group were single-platform users, according to BAML's second annual Asia-Pacific Treasury Management Barometer.

The remaining 30% indicated they use independent, multi-bank portals.

"This differs from global trends where there is equal preference for single-bank dealing platforms and third-party platforms," the survey notes.

One reason behind Asian treasurers' penchant for single-dealer platforms, BAML suggests, is the region's many managed exchange rate regimes.

"Multi-bank dealing portals that were developed initially in Europe and North America are typically designed to manage more liquid, less regulated currencies," the survey observes.

By contrast, in Asia, treasurers often need access to "local solutions and services rather than more generic dealing platforms to meet regulatory requirements", it adds, including the need for supporting documentation.

High volume, low value

A second reason, according to BAML, is that FX transactions handled by Asian treasurers are many, but of "relatively small value".

"Using a [single-dealer] platform may be more efficient, particularly due to the opportunity to conduct automated dealing for high/low volumes of transactions based on a pre-agreed margin that these platforms can offer," the survey notes.

"In contrast, multi-bank dealing portals are typically more suited to high-value transactions conducted individually, with the ability to obtain competitive quotes," it adds.

The use of electronic dealing is growing, in Asia as well as globally, but traditional methods persist: four in 10 treasurers in Asia still manage cross-border payments over the phone, similar to other parts of the world.

"Telephone dealing can take considerable time and resources," the survey warns, adding the "risk of error or fraud may be high".

"There is also little auditability over the rates achieved, so companies do not have the assurance of best price discovery," notes BAML.