WALL STREET JOURNAL ARTICLE REVIEW

· Title: Big Banks are ramping up their technology spending to maintain their dominance of the foreign exchange market

Author’s Name: Davis, Stephen

Date of the Publication: November 2, 2011

Author’s Purpose: Big banks realize that they must invest in technology if they are going to remain competitive in the foreign exchange market. They understand that telephone-based transactions are diminishing and that electronic trading is the predominant method of choice for today’s investors. Perennial markets leaders such as, Barclays, Citigroup, Deutsche Bank, Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, Royal Bank of Scotland Group, and UBS know that the stakes are high as the foreign exchange market brings in hundreds of millions in annual profits. Big banks must continue to refine their process by offering solid customer service through the use of new technology innovations and good decision making.

Article Summary: Big banks understand the importance of investing in solid infrastructure to gain a technological and logistical advantage over their competition. Customers love choices especially when it comes to saving and making money. Foreign exchange market trading brings in more than 1-billion in a good financial year and big banks want a piece of this consumer action. In fact, economists cite electronic trading as the primary driver of the post crisis recovery in currency-trading volume, which at an estimated $3.98 trillion daily in 2010 was some 20 percent above 2007 levels. However, the result of these developments has been nothing less than a technology arms race among the banks and multi-dealer platforms to provide faster, easier and cheaper trading services. For the big banks such a race can require spending $100 million or more a year on technology, analysts and industry executives say. Aite Group estimates that banks’ spending reached an all-time high of $1.5 billion in 2010, double the amount spent just four years earlier. One of the most significant innovations in the latest-generation platforms include enhancing trading tools and the addition of other asset classes, such as currency derivatives. In fact, over the past 5-years, Barclay has virtually doubled its global market share between 2005 and 2010, rising to No. 3 in the Euromoney ranking. Its BARX FX, now claims one of the industry’s biggest footprints, with more than 2,500 institutional clients.

Comments: Banks must continue to use cutting edge technology to meet and exceed customer expectations. This should enable sustained business growth in trading volume and customer satisfaction levels. Greater competition generally ensures that customer have expanded opportunities to invest and to make quicker decisions. Implementing new processes, procedures, and tools are critical to the ongoing existence of big banks. Offering the right tools for customer to use and having the right infrastructure to process and handle those investment decisions is the paramount objective.