Natixis clients choose to partner with this innovative FX operator for a number of reasons. Competitive pricing is part of it. But the main reason is how Natixis solves client problems quickly thanks to a remarkable range of service solutions. “While some banks focus on volume, we focus on service,” says Philippe Jeanne, global head of FX at Natixis, “our price is as good as anyone’s, but we make sure we deliver made-to-measure solutions for our clients through a completely industrialised set-up.”

This strategy is based on providing a  seamless range of FX products ranging from spot, FX swaps, forward and vanilla plus long-dated options – all managed in the same product line. “It gives us the necessary critical mass,” says Jeanne, “through a cost efficient set-up of 25 traders worldwide. Because our client base is well diversified, we make money on the whole range of products, almost in the same proportion on spot, forwards and options.”

It’s this approach that helps Natixis develop its business with smaller risks, as it has clients who typically buy into volatility – hedgers, for example – but also clients who sell for a pick-up in yield, like investors,  and thereby easing Natixis’ risk management profile. The upshot? A clever and comprehensive strategy that pays dividends for both the company’s clients and Natixis itself.

Natixis clients typically comprise:
–  European blue chip corporates, both large and mid-caps
–  Central banks.
–  Asset managers.
–  Hedge funds.

Client needs take priority always
Natixis clients want best execution and smooth trade settlement. They are also increasingly focused on reversing positions quickly, if needed, and at very modest cost. “Setting a stop-loss on an FX position is easy,” says Jeanne, “and can be managed in real time round the clock, which ensures that in the worst case you don’t lose more than you have set aside.”

The fact that FX products allow for real tailor-made solutions that match exactly client requirements is another draw. “I believe future trends,” says Philippe Jeanne, “will be linked to customer service and risk optimisation. In terms of price distribution, we already have all we need. What really is the need of a 25th, 26th mono-bank platform? On the other hand, online systems allowing clients to analyse the risk profiles of their portfolios, designing optimisation strategies, or portfolio immunisation, would be very useful indeed.”

Increasing cross-asset risk analysis will derive from present stress tests, thinks Jeanne, and should lead to a better understanding of diversification between different product lines. There are already many direct links between single underlying businesses, like FX and commodities for example. “But through multi-asset diversification it will become possible to increase business, both in volume and in number of clients, while actually cutting down the global risk taken by banks.”

The current credit crisis brought us from a world driven by return to a world driven by risk says Jeanne. “The result will be a logical balance between the two, where everyone will chose his strategic position in the market depending on his risk/return appetite.”

FX volatility – still a harbinger of credit anxiety?
Did FX professionals see the credit bubble well before it popped? FX speculations during crisis periods in emerging markets in the past were very often fought by governments using drastic interest rate hikes with local currencies dropping, leaving those countries with a depreciated currency but lower interest rates.

But this time was different. “This time the US dollar, and to a lesser extent the euro, looked like emerging markets themselves, with overnight refinancing skyrocketing on a number of days, before drastic Central Bank action was taken,” says Philippe Jeanne. “The smile in Japanese yen, and later in Euro-dollar options, also sharpened in early August 2008, showing real tension in the market.” Since then volatility has diminished, but it still remains much higher than two years ago.

Generally, FX reacts quickly to good or  bad news thanks to its liquidity. “On a global view, the credit crisis has shown the risks of disconnecting returns from the risks they are linked to,” says Jeanne. “That’s why I believe clients are more interested in solutions than just prices; depending on one’s risk appetite, there is an optimal FX strategy that will provide the best return. Our job is to provide our clients with the best return for the risk they are ready to undertake.”

A secure web platform
Natixis’ internet platform is designed to integrate its sales force and all other group desks together, giving live tradable prices that are connected to its trading and back-office systems.

In detail
– Natixis’ internet platform is connected to multiple contributors (FX All, 360T, RTFX, FX Connect, Bloomberg) for all clients.
– Clients tend to prefer multi-contributors to mono-bank platforms because there are already too many of them, and because ‘best execution rules’ are easier to ensure when a single platform gives you different prices – all you have to do is trade at the best price.
– Clients benefit from a full STP from trade to settlement, and can focus on designing with us the best solution for their own FX issues.

The road ahead
Natixis’ client business will grow steadily in the next five years. “Clients,” says Philippe Jeanne, “understand our strategy. Those who don’t yet understand it will become increasingly aware that we have a stable and secure parent company, that we are fully client driven, and that they too can benefit from the diversification of our client base.”
Natixis remains less interested in interbank volumes – which will have their ups and downs – than client turnover. “We will work to make sure we continue to give clients the best solution at the best price.”

Client trust is probably the bedrock of this innovative player. The market knows now that even banks can go bust. “I think the past 18 months,” says Jeanne, “remind clients that it is important to develop a relationship built on trust over time, and that it is critical to know precisely who you are trading with.”

Natixis’ two parent companies merged in July to form a new entity called BPCE, which is now the second retail banking network in France. “Our clients know we will still be there in the future to serve them. The best bank really is not the biggest: it is the one that makes the most sense of its clients’ risk/return appetite. It’s as simple as that.”

This text is a promotional document