Nomura’s tech revamp propels its global FX push

Nomura is looking to broaden its horizons by extending its foreign exchange remit from a traditional focus on spot to provide services across all FX products.

To do so, the bank has embarked on an overhaul of its technology to offer more accurate—and faster—pricing along with a new single-dealer platform.

The bank hopes the push will give it an edge over competitors as a greater range of FX instruments move towards full electronification across regions, both in pricing and execution.

“Nomura has had an e-FX offering, but we were tied to a lot of legacy-type applications and infrastructure. What we’ve done over the last few years is a whole front-to-back rebuild of the full architecture in e-FX,” says Ashvin Parkash, global head of e-FX distribution at Nomura.

The Japanese bank has focused on three areas in its rebuild: price formation, price distribution, and its new single-dealer platform.

Now we have a full new infrastructure, we have multiple pricing sources coming in, and that allows us to expand the remit of what we can offer

Ashvin Parkash, Nomura

For products like FX swaps and forwards, it previously had to rely on spreadsheets to generate prices. This cumbersome process caused delays in pricing and acted as a brake on client interest. Parkash says its traders have now moved to a new low latency architecture that can access a greater range of liquidity sources to produce more accurate prices on tenors up to three years, and then distribute that to clients connected via application programming interfaces.

As a result, he says this has made the bank’s services more appealing to real money clients that are used to consuming FX swaps prices electronically.

“Our technology gives us a very accurate mid-price, which we didn’t have before, and that’s given us a definite edge in these volatile markets,” he says. “Now we have a full new infrastructure, we have multiple pricing sources coming in, and that allows us to expand the remit of what we can offer.”

For example, the bank has boosted its electronic trading capabilities for emerging market currencies such as the South African rand, Polish zloty and Czech koruna, as well as pairs that are closely correlated with China.

Stream ticket

For derivatives products, Parkash says the bank can now electronically stream prices for G10 FX options, Scandi and non-deliverable options, as well as structured products like target redemption forwards (Tarfs) and accumulators.

“We now offer streamed pricing for structured products to our client base, and that’s something that we managed to leapfrog from not offering them at all to offering clients fully automated prices,” adds Parkash.

In addition to pricing, Nomura has sought to use the new technology to enhance risk management. The practice is currently limited to spot FX and one-month non-deliverable forwards, where the bank has developed a hands-free model to electronically manage the risk. Parkash says the eFX desk has begun to use the same technology for parts of its swaps business too.

“For standard tenor dates, we’ve enhanced the way we risk-manage certain parts of the swap. We will leverage electronic pricing and electronic infrastructure to hedge the liquid portion. We are exploring how to fully hedge beyond the standard tenors. But that’s still a work in progress for us,” says Parkash.

The electronic upgrades have also given the bank’s traders greater flexibility in the way that they skew prices to clients based on the risk the desk has, Parkash says. With clients now able to see the dealer’s skews immediately, the bank has increased its internalization rates “significantly”, Parkash says.

Furthermore, he adds Nomura can now internalize a greater range of products outside of spot FX with non-Japanese clients, resulting in increased flows. “If someone gives us risk in Asia, we can now skew globally whereas before it was all very siloed, so the internalization rates on the non-spot products have increased,” says Parkash. “Our traders have automated position-based skewing tools that they did not have before.”

Platform transformed

The other key area of focus is the launch of an upgraded, low-latency single-dealer platform (SDP). Based on HTML5 architecture, Parkash says the idea behind the new platform is to give clients greater control of the trade lifecycle.

This includes the creation of a blotter which provides users with a portfolio view of all their trades executed with Nomura. The bank has also hired several user interface specialists to enhance the client experience on the platform.

The idea, Parkash says, is to make the SDP more all-encompassing than before, delivering near real-time pricing, research and execution.

Only a handful of key clients have been given trial access to the new platform, but Parkash says the bank plans to fully roll it out from November.

Comparing the new platform with its competitors, Parkash says Nomura is finally in a position where it can compete at a time where demand for SDPs in Asia is increasing.

“There’s still a lot of appetite for using single-dealer platforms, and it’s an area where we will do a big push,” he adds.

That push will require effort. Comparing the new platform with its competitors, Parkash says Nomura is finally in a position where it can compete at a time where demand for SDPs in Asia is increasing. “There’s still a lot of appetite for using single-dealer platforms, and it’s an area where we will do a big push,” he adds.