State Street views FX as primarily a relationship-driven business and its investment focus reflects this partnership with its clients. As a principal FX business, State Street offers clients multiple execution choices with comprehensive electronic pricing capabilities, including a suite of dynamic algorithms and analytics tools, competitive benchmark solutions coupled with automated rules-based workflows.
The franchise has a core business rooted in the real money community and is recognized as the leading counterparty for this segment. This year has also seen a drive to diversify the client base further into new market segments, with the franchise recording double-digit growth with new communities, namely corporate, banks, private equity and electronic money institutions.
A key reason behind this growth is the provision of a global network of sales and trading services, including Latam and Apac, which when combined with State Street’s global custodial network provides clients with a comprehensive range of onshore access. This global network ensures clients have access to on-the-ground contacts who can offer insights into the into local market conditions and developments, along with access to liquidity.
In addition, the majority of the spot volume quoted by State Street is now from third-party institutional investor portfolios that are not under custody at State Street, indicating that clients are actively choosing to trade with State Street the majority of the time.
State Street addressed the challenge arising from the transition to the T+1 settlement cycle by enhancing its automated service StreetFX. It developed an FX trade execution solution integrated with DTCC Institutional Trade Processing to streamline the FX execution and settlement process. Through direct connectivity and a real-time dashboard, StreetFX automates FX trades for T+1 settlement, providing transparency and reducing risk. Additionally, the bank introduced a T+0 funding solution for same-day FX settlements, especially benefiting Apac and EMEA clients, at no extra cost.
State Street also leveraged research to support its client base. It hosted several global research conferences, drawing significant attendance, including 162 clients at a Boston, US event and 373 and 138 clients at the Apac and EMEA events, respectively. These conferences covered diverse topics such as inflation, machine learning and geopolitical risks.
In June 2023, the bank rolled out "Street Signals", a weekly podcast to help real-money clients access leading academic research, proprietary indicators and market strategies. Weekly downloads have grown from 250 at launch to over 400 since its launch, with episodes typically reaching 450-500 downloads. Also in June 2023, the FX Signals Studio alert publication was launched to flag changes in the FX behaviour of institutional investors. Using a back-testing tool for real-money clients, it highlighted high-conviction trade ideas. Between April 2023 and May 2024, 16 alerts were issued with a 69% success rate.
Education was at the epicentre of the bank’s client engagement strategy. Through the State Street learning programme, the bank offered both virtual and in-person webinars, catering to a broad audience of experienced investors and recent graduates. Between April 2023 and May 2024, the service hosted 33 sessions attended by over 4,150 participants, covering a wide range of topics from inflation to AI.
The bank also prioritized in-person learning. Its inaugural FX 101 two-day event focused on teaching FX fundamentals was one notable example. Day 1 featured a virtual component covering a broad range of topics, from FX options and algos to T+1. It attracted 40 in-person attendees and over 115 virtual participants. The second day featured an in-person FX trading simulation at Bentley University, Massachusetts, where participants acted as market makers, competing against each other in simulated historical market events.
“We’re committed to exploring innovative ways to help improve outcomes for investors. In the lead-up to the transition to T+1, we developed an automated workflow solution with direct connectivity to DTCC and its central trade matching platform, delivering automatic execution through a seamless dashboard,” says Dale Haver, senior managing director at State Street.
“The integration reduced settlement time for FX transactions leading to shorter trade cycles for investors and helping to reduce their counterparty risk.”