Best Banks Awards: Danske Bank

Historically, Danske Bank has had a strategic preference for building many software solutions in-house. This year, however, it made a decision to challenge this strategy after a deep dive in its FX business.

The pivot follows a move some years ago, when Danske decided to concentrate on market-making in Scandinavian units and G3, rather than competing globally across all currencies.

“We reviewed our full FX infrastructure, and decided that core competencies such as risk management and price formation will remain based on in-house technology; commoditised services such as connectivity and aggregation can be outsourced to external providers,” says Niklas Karlsson, global head of currencies at Danske Bank.

This doesn’t mean the Danish bank is not looking to invest in technology. On the contrary, says Troels Estrup, head of e-FX, Danske is looking to upgrade its underlying technology completely next year and invest in electronic client solutions.

“Although we are looking forward to an upgrade of our FX technology, we are not forgetting that we run a client-driven franchise, meaning our clients can also expect some tangible upgrades to the electronic offering they use every day,” he says.

Danske Bank has been voted the winner of the Best Bank for Scandinavian Currencies category at the 2018 FX Week Best Banks Awards.

Next year, algos will be made available to a wider set of clients through multi-dealer platforms and we will be expanding the available strategies also

Niklas Karlsson, Danske Bank

An example of new product investment is the bank’s algorithm suite, which until now has only been available to select customers. Karlsson says client demand for algo execution in Scandies has grown significantly over the past 12 months, as institutional market participants have become more comfortable with these tools in G10 trading.

“Next year, algos will be made available to a wider set of clients through multi-dealer platforms and we will be expanding the available strategies also,” he adds.

Transparent and smart

Transparency is key. Already, clients trading with Danske on a risk price get a full breakdown of costs involved in the quote, including XVA costs and mark-ups. “Our business is very transparent and we have some smart people who understand what our clients need help with,” says Karlsson.

Research and advisory remain key differentiators, as clients attempt to navigate markets. The bank also offers a strong suite of hedging products, although Karlsson notes that as result of low-volatility markets, the bank has seen FX options volumes decrease this year.

Low volatility has also led to less hedge fund participation, at the same time as the fragmentation of liquidity in Scandinavian currencies continues. Spreads have compressed in the region’s currencies, as global banks continue their efforts to wrestle away market share from domestic dealers.

“In Scandies, we are a serious risk-warehousing bank. If we moved away from our principal model, we would lose our competitive edge to global banks,” says Karlsson. “We have high-technology ambitions to make sure we stay relevant and we will continue to grow our franchise in Scandinavia next year.”

Interviews with the 2018 FX Week Best Banks Awards winners

JP Morgan

Best Bank Overall for Foreign Exchange Dealing

Best Bank for FX for Banks

Best Bank for FX for Investors

Best Bank for Spot FX

Best Bank for FX Forwards

Best Bank for EUR/USD

Best Bank for USD/JPY

Best Bank for EUR/JPY

Best Bank for E-Trading

Citi

Best Bank for FX for Corporates

Best Bank for Currency Options

Best Bank for Structured Products

Best Bank for FX Prime Brokerage

Best Bank for FX in North America

Best Bank for Emerging European, Middle Eastern and African Currencies

Best Bank for FX Research and Strategy

HSBC

Best Bank for FX in Asia-Pacific

Best Bank for Renminbi

Best Bank for Emerging Asian Currencies

Deutsche Bank

Best Bank for FX in the Eurozone

ANZ

Best Bank for Australian Dollar

Barclays

Best Bank for GBP/USD

Best Bank for EUR/GBP

Best Bank for FX in London

UBS

Best Bank for Swiss Franc

NatWest Markets

Best Bank for FX Post-Trade Services

360T

Best Professional e-Trading Venue

Best Vendor for Dealing Technology

Refinitiv

Best Broker for Forward FX

Best Broker for Emerging Markets FX

LCH

Best FX Clearing House

EBS

Best Broker for Spot FX

Bloomberg

Best Market Data Provider for FX

Danske Bank

Best Bank for Scandinavian Currencies

Standard Bank

Best Bank for South African Rand

Best Bank for African Currencies excluding ZAR

BMO Capital Markets

Best Bank for Canadian Dollar

Banco Santander

Best Bank for Emerging Latin American Currencies

kACE

Best Vendor for Risk Management/Options Pricing Software

Saxo Bank

Best Prime-of-Prime House

BGC (no interview)

Best Broker for Currency Options