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FX & Money Markets 2002 Benchmark |
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An analysis of the costs and relative
efficiencies between major banks for the processing of trades in the
Treasury Markets: |
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Foreign
Exchange |
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Currency Options |
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Money
Markets |
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Trade volume is still the primary driver of low
processing costs |
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Significant Change over last 12 months |
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Processing Costs for both FX and Money Market
trades have reduced |
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Large Variations between banks |
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Variation in Cost per Trade supports move to
Outsourcing |
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Variation in Cost per Head supports the case for
relocation |
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Banks are increasingly using the Z/Yen studies
to identify areas for process improvement and to build internal trade
costing systems. |
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….. “we have based our operations trade costing
system around the Z/Yen cost per trade as it is the most accurate measure
available and is becoming the industry standard” |
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This report summarises the results of Z/Yen’s
2002 Benchmarking Study into Treasury Processing Costs |
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Participants |
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16 major Global/European Banks over 2 years |
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Products - Global Treasury Markets &
Derivatives. |
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Foreign Exchange |
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Currency Options |
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Money Markets |
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Functions & Activities |
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Costs – Operations, Middle Office/Product
Control and IT |
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Headcount |
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Volumes |
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Key Benchmarks |
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Industry Standard Cost per Trade |
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Cost per Head |
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Operational Throughput (Trade Volume Processed per Head) |
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Economy of Scale (Cost per Trade &
Throughput relative to volume) |
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Banks that have participated in the study over 2
years have seen costs reduce by between 5 and 25% |
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Operational efficiency is not impacted by having
staff located outside of central London. |
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There is a correlation between higher
compensation and increased operational efficiency, however STP rates and
effective technology are also key efficiency drivers. |
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Banks which process in more that two locations
are likely to have a higher overall Cost per Trade. |
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Cancel & Correct Rates (trades needing to be
re-booked) vary from bank to bank and show a positive correlation with
efficiency as does spending on exception management. |
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Banks who did not participate in this year’s
study are invited to contact Z/Yen to have their 2001 data ‘retro-fitted’
and compared to the existing participants. |
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Z/Yen will also use the survey results to build
a forecasting model to assist banks in cost and headcount planning. |
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Additionally,
Z/Yen has outlined a number pieces of further analysis which we
believe will be advantageous to banks seeking to take advantage of the
findings of this survey. These are: |
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Activity STP Analysis - Further detailed
analysis for selected or all products to identify breaks (or pain points)
in the product workflow. Cost
impacts of these breaks can then be measured and compared to best of breed. |
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Best Practice Analysis - Using our industry
knowledge of over 25 major banks, analysis of operational practice across
products to identify areas of strength, weakness and over/under capacity. |
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Operational Health Check - Using Z/Yen's OPEN
template, review operational performance across a variety of
dimensions. Measures are both
qualitative or quantitative. Most assessments are based on data that is
internal to the Operations department, but there is also an external
dimension whereby the degree of customer satisfaction can be measured. |
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Sourcing Strategy Assessment – Gain value from
cost analysis of your processing areas to identify potential areas of
alternative sourcing, e.g., joint ventures, industry-wide consolidation
opportunities, insourcing, outsourcing. |
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Transaction Costing - Development of a
transaction costing methodology to allow direct charging to the business
with comparison to external benchmarks. |
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As well as FX & Money Markets, Z/Yen has
also carried out benchmarking surveys for: |
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Equity & Debt Products |
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Clearance & Settlement Fees |
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Customer Relationship Management |
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Z/Yen will be repeating the above 3 studies in
2003. In addition, Z/Yen propose to initiate the following: |
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Operational Performance of Brokers – Market
Survey |
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US Domestic Equities and Debt Products |
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IT Costs |
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Brokerage Costs |
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For more information on the studies and Z/Yen,
visit our website www.zyen.com or call Jeremy Smith on (020) 7562 9562. |
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Notes