World’s Best FX Providers 2011: Best Foreign Exchange Research & Analysis

Best Foreign Exchange Research & Analysis

Research

BNY Mellon

BNY Mellon, one of the largest foreign exchange dealers in the US, offers support in virtually all currencies, with particular expertise in emerging market currencies. In addition to being the largest custodian in the world, BNY Mellon acts as depositary for more than 2,100 depositary receipt (DR) programs from 67 countries. It is also the leading provider of corporate trust and agency services.

BNY Mellon is uniquely positioned to assist global fund managers with their FX needs. The bank has approximately 140 FX professionals in nine financial centers around the world. BNY Mellon trades more than $45 billion of foreign currencies on an average day, through 13,000 transactions. The bank’s currency management specialists provide specialized investment advisory services to institutional investors. For corporations, its FX offerings are integrated with its cash and liquidity management services, which are backed by a network of global offices.

BNY Mellon recently expanded its currency administration services to include index-based hedging programs. These programs provide more than $17 billion of outsourced currency hedging on the bank’s proprietary platform, iHedge. The bank’s hedging service provides clients with a disciplined and transparent approach to calculating and executing hedges and making periodic adjustments.

Fundamental Analysis

Brown Brothers Harriman

Brown Brothers Harriman is a leading FX provider to global investors. “Our FX operation is conducted purely on a transactional basis for our client base, which consists of mutual funds, insurance companies, pension funds and asset managers,” says Marc Chandler, global head of currency strategy. “This is what the market dubs ‘real money,’ as opposed to corporate trades and leveraged accounts.”

BBH, the oldest and largest partnership bank in the US, serves medium-term investors. “Our commentary benefits from the fact that it has to serve the needs of only one market segment, instead of trying to please everyone,” Chandler says. “For the most part, medium-term investors do not see currencies as an asset class, but as the means to purchase a foreign asset. While we provide market intelligence to those seeking to execute today, our emphasis helping clients recognize what is noise and what is the real signal that the markets and the economy and the policymakers are generating,” he says.

Chandler says BBH’s most controversial call in 2010 was that the fourth quarter was going to be a quarter of two halves. “We said the dollar would sell off as the market priced in QE2 [the Federal Reserve’s second round of quantitative easing] and then recover as some of the uncertainty in the US was lifted, and as the smoldering problems in Europe became a burning fire,” he says.

Technical Analysis

BNY Mellon

BNY Mellon Global Markets’ multiasset research product, iFlow, provides access to data and insights into cross-border investment activity, including foreign exchange. Based on an analysis of the more-than-$24 trillion in assets under BNY Mellon’s custody and administration, iFlow’s output reflects a significant share of overall market capitalization. This information encompasses daily investor activity across currencies, equities and bonds in developed and emerging markets, as well as monthly market positions. “The IMF’s inclusion of iFlow findings in its most recent Global Financial Stability Report underscores the importance of our capital flows research,” says Jorge Rodriguez, executive vice president and head of global FX sales, BNY Mellon. “Adding this important new dimension to our research support for our clients while maintaining the timeliness and insightfulness of our fundamental currency research findings is a remarkable accomplishment.”

BNY Mellon supports all dealing styles, from direct dealing with FX desk traders, to electronic trading through its proprietary platform, iFX Manager, or multibank portals. It also performs standing-instruction execution in FX related to securities settlement. BNY Mellon’s iConfirm delivers post-trade services, such as confirmations and maintenance of standing settlement instructions.

Forecasts

BNY Mellon

BNY Mellon’s Global Markets Research provides short- and long-term analyses of the currency markets through seminars and daily commentaries distributed via e-mail and available in online archives. BNY Mellon provides monthly updates on quarter-end currency forecasts in more than 70 currency pairs. Its forecasts are based on economic and capital-flow fundamentals in the major currencies. Forecasts for emerging markets incorporate purchasing power parity and other currency-regime factors. The bank also uses a value-based process to identify currencies that are trading out of line.

BNY Mellon offers competitive pricing in all of the major European, Latin American and Asian currencies for FX spot, forward and option products. It also offers global support of market making in nondeliverable forwards.

Strategy/Hedging

Deutsche Bank

Deutsche Bank has developed reliable and fast pricing for currency derivatives. Its indicative prices are streamed over Autobahn FX, giving the bank the lead in the nascent e-derivatives market. Foreign exchange strategy and hedging have gained in importance as a result of increased volatility in the market. “Our pricing engines use sophisticated mathematical techniques to generate these prices automatically, rather than relying on manual updates,” says Kevin Rodgers, global head of FX derivatives. “The platform’s reach and robustness enables us to transact with clients we would not normally be able to cover.”

During 2010, the Autobahn FX platform made more than 2 million indicative prices, or one every 10 seconds or so, which would not have been possible without automation, Rodgers says. Deutsche Bank introduced ATOM, or automated tools for options order management, in 2010, with a number of e-commerce innovations. The bank’s clients can now leave orders in premium terms and in volatility terms on options and strategies involving a wide variety of currency pairs. An additional feature is the ability to cancel orders based on moves in spot currency prices or the passage of time.