TECHNOLOGY SPOTLIGHT

LONDON--First Chicago NBD has launched an FX processing outsourcing service through its Global Trading Operations (GTO) subsidiary.

The service will perform all forex back office functions, including trade confirmation, settlement, profit/loss accounts, nostro accounts reconciliation, limit monitoring, reporting, query resolution and brokerage, say GTO officials.

Alan Stark, chief executive of GTO, says the bank decided to launch an outsourcing service to help institutions maintain low costs and minimize the operational risks involved in forex transaction processing.

Banks are faced with increasing processing costs and operational risks, he adds, due to pressures such as the euro, Year 2000 compliance and the rise of internal model-based treasury regulation.

Stark estimates that many banks will save more than 20 per cent of their back office costs by outsourcing to GTO's service. Clients will be charged on a per transaction basis.

"Without having to worry about forex processing, managers can redirect attention to evaluating risks or developing new products," adds Stark.

The service is available to banks of all sizes, though GTO is targeting banks that execute more than 800 forex transactions per day. The company is operated as an independent subsidiary of First Chicago NBD.

Stark says GTO's primary aim is to establish itself in the forex markets, but it is already moving towards support for additional products. First it will expand into money markets, then fixed income securities, then derivatives, he adds.

First Chicago has achieved an above 90 per cent level of straight through processing in forex instruments, says Stark, and boasts an error rate of only 1 in 24,000 trades.