FX and MM 2002

 



 

 

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Treasury Cost Study Predicts City Outsourcing Deals

 

Processing Costs for FX and Money Market trades have reduced over the last 12 months reports a new survey by Z/Yen, the City-based Risk/Reward Management firm.  The survey was based on the processing costs, headcount and trade volumes of 10 major banks and covers 14 product types including FX spot/forward, Money Market loans/deposits and Currency Options

 

Over the last twelve months, the average processing cost for a Foreign Exchange trade has reduced from $11 to $10 while a Money Market trade has reduced from $31 to $22.  These reductions have been driven by increased volume at some banks and also by increased consolidation of operations locations, which has also resulted in a lower cost per head. 

 

However, the survey found that processing efficiency had actually reduced for some products with “Operational Throughput”, i.e., the number of trades processed by each operations head reducing by 8% for FX.

 

Between banks, there was a wide range of processing costs: for FX, the cost per trade for the most expensive bank was 20 times more than the cheapest and for Money Market, 7 times more.  Statistical analysis of these results supports the following predictions of outsourcing deals:

 

 

Within next 12 months

Within 2 to 3 years

Foreign Exchange

1 to 2

3 to 6

Money Market

2 to 4

5 to 10

 

Jeremy Smith, a Director at Z/Yen, said, “Although there are signs that the cost per trade is reducing, many banks have too little volume to sustain their high fixed costs.  We predict that within the next 12 months, there will be at least two major outsourcing deals in the treasury processing market.  However, long-term growth of outsourcing depends on the market’s readiness to accept innovative solutions.”

Banks are increasingly using cost per trade analysis to identify focus areas for processing improvement.  A senior FX Business Manager at a global Investment Bank, said, “this type of detailed study enables us to analyse our processing costs on a consistent basis across the industry and helps us to set realistic targets for re-engineering". 

 

 

For further information, please contact Jeremy Smith, tel: (020) 7562-9562, e-mail: jeremy_smith@zyen.com.  A summary of the results of this study can be downloaded “FX & Money Markets 2002”. 

 

Z/Yen specialises in risk/reward management, an innovative approach to improving organisational performance.  Z/Yen’s clients include blue chip companies in banking, technology and professional services as well as charities and care organisations (see www.zyen.com).

 

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Last modified: 15 July 2008