ABN Amro’s Top Priority Is STP

LONDON--STP will be the biggest IT issue facing banks in 2002, according to David Woods, head of e-commerce for financial markets at ABN Amro in London. No surprise, then, that it’s his number one priority for the year.

He says "proper" STP is starting to appear, but it’s still very rare and more prevalent in the US.

"When people talk about STP at the moment, they often simply mean paperless ticketing from the electronic trading system to the dealer’s back office, with possibly electronic confirmation to the customer," he says. ABN currently has that in place.

The firm doesn’t have full "external" STP--delivering a done-and-dusted trade to customers’ back offices electronically--though it can be achieved through some multi-dealer systems, such as Tradeweb. Woods aims to achieve external STP by the end of the year.

"Banks want it, and customers are making it a condition of electronic trading," he says. "Banks will invest to bring it about." But he warns that banks will need to develop much wider interfaces to connect their trading systems to the wide variety of unfamiliar applications in customers’ back offices. He says back-office applications such as Sungard’s Quantum can facilitate STP, but there are no "all-singing, all-dancing" solutions yet.

The biggest IT issue for the next five years, though, will be responding to the new ways customers are doing business. "Customers can now create their own ‘dashboard’ of banks’ proprietary [trading] systems," he says. "If you put your rates up on a multi-dealer system, you know people will compare them to your competitors. But you don’t expect them to compare your rates if they receive them via your own system."

Now that customers can pick and choose what to have on their screens, he says, they will notice if a bank is offering different prices to the same customer via different means. So his second priority is to deliver one price with streaming and filtering to add margins depending on the type of customer, rather than where it will be displayed. That way, customers always see a consistent, competitive price. This should be operational on ABN’s customer and multi-dealer sites by the end of Q2.

Woods says his third priority is developing collaboration tools for Web trading to net customers’ trades for settlement. "We have a version in some activities but not for all products and not in a fully collaborative state." For example, the bank has an in-house trading platform as part of its prime brokerage division. Collaboration tools are also set to be ready at the end of Q2, and all three projects are 30 to 40 percent complete, which, he says, is "where we want to be."

These projects will be completed within a budget that will be the same as that of 2001, although lower than those of 1999 and 2000. He says there is a market-wide problem of prioritizing the many things to be done in the coming year. "Customer pressure will force banks to spend more again," he says, adding that the US will probably cope best with this, as it has traditionally spent more and can therefore survive while spending less.

Although he confirms that banks are doing more to cope with disasters in the future, he says ABN won’t spend particularly more on business continuity in 2002. "People always had plans in place, but these were not always properly tested," he says. "DR done properly is very expensive."

ABN has big IT infrastructures in both Amsterdam and London, with IT functions located close to corresponding businesses, using the sites as back-up for each other. It has refined its plans in the last few months and is confident it could cope with an attack on London similar to those of Sept. 11.

There will definitely be further consolidation of trading portals, Woods says, pointing to Redibook and Archipelago and consolidation between bond platforms (TTW, Dec. 3). The trend hasn’t been seen in foreign exchange, he says, although there are rumors surrounding bitter rivals Atriax and Fxall--especially since their competitors are holding up so well.

However, he thinks that if clients can mix and match their own multi-dealer sites from different proprietary bank platforms, the rationale for multi-dealer platforms weakens. "Two years from now, multi-dealer sites may not be so common," he says.

What else won’t be common? Wireless--Woods’ choice for most overrated new technology, at least for institutional trading. It does have advantages: "It’s great for allowing guys to get out on the road, to sell things or demonstrate real-time prices. And it could be used for instant decisions--for example, you could send a message to a treasurer to tell him a security has reached a certain value, does he want to buy?" But there’s one problem: "CEOs don’t like the idea of their treasurer trading from the pub," he says.