As a global financial institution with a rising world footprint, RBC is now a legit competitor to the tier 1 US banks for FX enterprise.
This standing is the results of a constant digital buying and selling technique and a forward-thinking strategy that has positioned RBC not simply as a significant participant now however one with a sustainable enterprise that can scale into the long run.
Kevin Love, International Co-Head of eFX Buying and selling Merchandise at RBC Capital Markets refers to an ‘digital mindset’ that offers the financial institution an edge over rivals which have traditionally trusted handbook processes.
“After I was introduced on board the primary goal was to develop a sturdy core pricing framework that might underpin the enterprise,” he explains. “How we view it internally is akin to a hub and spoke mannequin with our eFX pricing engine sitting on the middle.”
RBC has an in depth distribution community throughout its retail, business, institutional and wealth administration companies which has grown additional on the again of property which have been bought over time. To make sure that it’s profiting from this broader franchise, RBC has completed an excessive amount of work to take away any inside roadblocks to making a single imaginative and prescient for its FX enterprise and obtain the economies of scale this community affords as one of many largest banks on the planet.
“By centralising execution, we have now been capable of minimise transaction prices,” says Love. “We have now internally improved the liquidity that’s out there to us and in flip have been capable of enhance the liquidity that’s out there to our shoppers. We have now additionally constructed intensive exterior connectivity to the foremost exchanges through our distribution community to satisfy shoppers the place they commerce.”
Whether or not shoppers are searching for principal threat switch, long-dated forwards or company algorithms, the financial institution is assured it may ship.
Expertise construct
RBC’s know-how technique strategy is predicated on a mix of construct and purchase, which has enabled it to develop robust inside IP and extra scalable options than would in any other case have been out there.
This offers higher flexibility in the case of shopper interplay by means of the availability of bespoke options and diminished time to market.
One of many financial institution’s most important know-how initiatives got here with its acquisition of HSBC Financial institution Canada when it efficiently executed the biggest and most advanced know-how transition in its historical past.
Whereas RBC’s scale and technical capabilities positioned it nicely, it nonetheless needed to navigate the complexity of integrating information from quite a few HSBC Canada techniques and precisely remodeling and mapping it to RBC’s platforms.
A devoted integration workforce of greater than 4000 staff from throughout the enterprise – together with 2000 know-how professionals – labored on all elements of the mixing, together with course of and know-how.
An intensive technical migration blueprint was developed that lined each side of product, information and system integration, in addition to system enhancements and readiness.
This huge conversion concerned integrating and growing technological capabilities for a few of RBC’s most crucial and sophisticated techniques throughout the enterprise. Infrastructure was reviewed to make sure enough processing, storage, networking capability and gear was out there for the conversion of just about 800,000 shoppers, over 2 million accounts and in extra of 4000 new staff.
Groups had been ready for each step with intensive enterprise and technical dry runs, gown rehearsals and readiness actions which helped considerably in early drawback detection and options.
“In 2021 there was an initiative to leverage the know-how and assets from the equities enterprise and apply them to FX, from liquidity provision to back-end customisation, which has turn into one of many key differentiators of our algorithmic providing,” explains Gained Kim, Head of e-FX gross sales at RBC Capital Markets.
Consumer partnerships
RBC’s concentrate on deep partnership and co-creation permits shoppers to carry their methods to life, one thing which is especially beneficial for these with refined and particular preferences across the liquidity venues they need to entry.
“As we undergo this transformation, we need to make it possible for we have now the analytics and the insights to energy shopper engagement and acceptable enterprise choices,” says Love. “Knowledge seize allows gross sales and buying and selling to supply extra correct pricing and enhance our competitiveness in addition to be extra proactive in how we interact with shoppers.”
With upgrades in shopper analytics, gross sales might be extra proactive in serving to shoppers handle their threat throughout forwards and choices, making the dialog round place administration extra strong.
“We’re displaying thought management by participating with shoppers proactively and flagging choices they won’t have realised they needed to make,” says Love. “They actually respect this strategy and likewise our recognition that not all shoppers are the identical.”
Corporates are largely pushed by hedging choices and the way they can clean their money flows, handle monetary reporting and ensure they aren’t making losses on FX, he provides. “Our threat options group are having these conversations with the mindset that these corporates and their objectives are completely different to these of institutional buyers who’re typically a bit extra refined.”
These shoppers are typically measured towards sure benchmarks to make it possible for they’ve achieved finest execution and are subsequently targeted on slippage and execution prices.
To handle considerations round workflows, RBC has constructed particular instruments that allow the institutional gross sales workforce to ensure they’re catering to these shoppers in the very best manner
Optimising workflows
To handle considerations round workflows, RBC has constructed particular instruments that allow the institutional gross sales workforce to ensure they’re catering to these shoppers in the very best manner. An analogous strategy is taken on the business or retail gross sales desk the place there’s extra concentrate on making funds and lowering friction when it comes to how they’re managing balances of their accounts.
“We’re capable of cater to these wants by constructing bespoke instruments for our gross sales desk and people shoppers,” provides Love. “It isn’t a one measurement suits all strategy and as we go down this path of electronification, we’re ensuring that what it necessary to every shopper is the first consideration.”
Given RBC’s measurement relative to the bulge bracket banks, there has at all times been an acknowledgement of the have to be nimble and scale extra effectively. A part of that course of has concerned breaking down inside silos to allow groups to do extra with much less.
“Within the digital world we have now adopted a cross-asset skill, constructing one thing as soon as and utilising it throughout a number of enterprise traces,” observes Kim
That is highlighted by the Multi Asset Company Options (MAAS) workforce inside International Markets which focuses on leveraging know-how throughout all asset courses. A big a part of this workforce is the multi asset buying and selling analytics which is reside throughout equities, futures, and FX with shoppers in beta stage or inside testing. This analytics suite offers shoppers each pre-trade and actual time suggestions on how property are performing, relative to their benchmarks and early suggestions suggests it’s creating a degree of differentiation for RBC as considered one of only a few banks with the sort of performance.
“One other space the place we’re introducing higher effectivity is by having our MAAS workforce use their cross-asset experience to construct foundational algos,and having our salespeople be extra macro,”says Kim.
“There may be a whole lot of cross- promoting internally as a result of we associate with our wider International Markets groups, so we’re in fixed dialogue with our fairness gross sales colleagues on our mutual shopper names and the way we will cross-sell charges or FX and vice versa.”
RBC has already had a whole lot of success in cross-selling. “A number of banks speak about cross-selling initiatives however we have now turned this into actuality constantly, which is necessary,” provides Kim.
Clever strategy
RBC is a market chief in AI analysis and innovation fueled by it’s pioneering funding in RBC Borealis and extra lately by means of creation of the AI and Digital Improvements Workforce. The Capital Markets-based workforce’s mandate is to lead the event of the end-to-end AI and digital innovation technique throughout Capital Markets, partnering throughout traces of enterprise, Expertise , Borealis and the broader enterprise to ship tangible shopper, business and measurable outcomes. Government degree assist has been key to creating consciousness and momentum round such initiatives as its propriety ATOM (asynchronous temporal mannequin) basis mannequin for monetary providers enabling the financial institution to leverage distinctive insights and develop revolutionary options inside a accountable AI framework for monetary providers.
Created by RBC’s analysis institute, RBC Borealis, ATOM was securely skilled utilizing giant scale monetary datasets together with billions of shopper monetary transactions, offering it with a singular breadth of data in monetary providers.
ATOM is a part of RBC’s Lumina information platform, which systematically collects and curates occasion information alongside all enterprise traces and allows AI scientists to course of as much as 10 billion transactions per minute. As a basis mannequin, it has deep monetary experience that can be utilized throughout quite a lot of banking duties. A number of RBC services and products at the moment use ATOM’s capabilities.
ATOM will play a central function in RBC’s ambition to realize between $700 million and $1 billion in enterprise worth from AI-driven advantages by 2027 by means of a number of AI services and products throughout all traces of enterprise and takes place in a accountable AI framework that meets regulatory necessities and ensures the info by no means leaves RBC management.
RBC’s fame as a frontrunner on this transformative know-how enabled the financial institution to leverage its information scale and place it to leverage AI’s potential in monetary providers. First utilized in 2023, ATOM has been deployed safely in a number of services and products to create an individualised product and shopper expertise, thereby higher assembly shopper wants with a tailor-made strategy.
RBC Capital Markets has additionally labored with RBC Borealis to develop an AI-powered digital buying and selling platform with the purpose of delivering improved execution high quality and shopper insights. Often known as Aiden, it makes use of deep reinforcement studying to be taught from its experiences out there and modify to altering buying and selling circumstances in real-time.
RBC’s use of conventional AI and machine studying methods in its pricing engine is important to sustaining competitiveness in FX markets. “This provides us an excessive amount of confidence in our threat administration strategy,” says Love. “We work intently with RBC Borealis to develop and refine this signaling and we are actually seeking to develop it so we will leverage the inner IP we have now constructed to tell our fairness or charges buying and selling.”
Spot success
Digital FX is usually the primary contact level for shoppers participating with RBC. Spot trades current a a lot decrease barrier to entry when it comes to onboarding necessities and the financial institution’s competitiveness on this market allows it to construct relationships and finally cross-sell much less liquid, excessive contact merchandise that provide extra worth from a income perspective.
“We want to ensure we’re positioned to take advantage of these alternatives,” says Love. “So whereas we have now a made a big funding in our core FX stack, we have now additionally been happening the liquidity chain and product set to ensure we’re capable of provide the entire universe of merchandise to our shoppers.”
Choices
Choices is likely one of the areas the place RBC has elevated its capabilities. The financial institution has at all times had a big Canadian choices enterprise however in recent times has targeted on growing the variety of markets it competes in, which has been profitable when it comes to the variety of currencies lined but additionally the vary of merchandise out there.
“We recognized quite a lot of product areas the place there was a shopper want and have been capable of fill that hole,” says Love. “We have now additionally expanded our general foreign money providing to make it possible for we’re successfully a one-stop-shop for shopper wants.”
Purchasers can now commerce in round 50 foreign money pairs and RBC plans to extend this quantity so it may facilitate funds for a good wider vary of business and retail shoppers.
Reimagining Money Administration
In April 2024, RBC Capital Markets launched RBC Clear, a money administration answer for Fortune 1000 firms within the US that permits company treasurers to realize traceability and transparency of transaction lifecycles in close to actual time.
The platform provides quite a lot of distinctive options, together with streamlined onboarding by means of using current shopper data and an onboarding tracker; close to real-time standing on funds; optionality on how shoppers need to be up to date on transactions by means of a digital-first answer; and actionable information insights to ease day after day administration and reporting.
One key rollout for the platform for the tip of 2025 is FX capabilities, designed with the identical ethos of placing shoppers accountable for their working capital.
“This demonstrates our dedication to the US market and the rising scale of our enterprise,” says Kim. “RBC Clear not solely helps the money administration wants of those corporates – sooner or later, it can additionally make it possible for they’ve entry to all of the performance they want from an FX perspective.”
Built-in technique
The platform is one more instance of how the completely different pillars of RBC are capable of function seamlessly to leverage economies of scale and construct out liquidity and operational effectivity.
Whereas RBC is now firmly established as one of many main worldwide banks for FX and different asset courses, it continues to profit from its Canadian heritage and particularly the notion of Canadian establishments as being clear with their shoppers.
“This fame is nicely deserved and we try day by day to take care of it by making certain that we do the suitable factor by our shoppers,” says Love. “It’s a main motive for our success and actually involves the fore during times of market stress. When markets are risky and liquidity dries up, shoppers know they will depend on us to assist their enterprise.”