Clients who use this service want to understand what is happening to the FX order flow that their custodian and other banks execute on their behalf. This is both the low value/high volume income repatriation deals and also those that are higher value trade related, especially restricted market deals. Our clients recognise and we reinforce, that it is perfectly reasonable for custodians to "earn a spread" on the FX trades they execute. The objective of this analysis is to determine whether the client's actual experience is reasonable and how it compares to both the FX market and that of their peers.
For most clients we retrieve FX data from their custodian's workstation. However, some fund managers provides us with FX data directly from their fund accounting systems. Once we have received the data we compare the rates for each trade versus two independent market sources for FX rates.
Clients then receive a monthly report which compares the rates they received versus the FX market and their peer group. The more detailed analysis includes:
- Analysis by size of FX deal.
- Breakdown by type of FX deal - major, minor and exotic currency crosses.
- Pension funds can see the performance of each fund manager.
- Fund managers can benchmark their different counterparties, where applicable.
This monthly analysis allows these comparisons to be made and quantifies the financial effect on the fund of the FX rates received.