“The FX market trades in milliseconds, so timing and how you enter the market is crucial. Our team collectively has over 100 years of trading and FX overlay experience, so we know the market and how to provide a world-class passive currency overlay service.”
Hans Jacob Feder, Ph.D., Global Head of FX Services
The foreign exchange (FX) market is the largest financial market in the world in terms of trading volume, liquidity, and value. With an estimated total value of $2.409 quadrillion, the FX market processes an average of $6.6 trillion transactions daily. This is a significant increase from 2016, when the Bank for International Settlements (BIS) conducted an analysis concluding that the FX market was valued at $1.934 quadrillion dollars.
We sat down with Hans Jacob Feder, Global Head of FX Services, to learn about how MUFG Investor Services is helping clients tackle their toughest FX hedging challenges.
What are some of the challenges of operating a FX hedging program?
Managing a currency hedging program is a heavy operational burden for clients if they don’t have the required in-house expertise and experience. On top of that, navigating the complexities of price execution and currency risk can be significantly time consuming and costly.
How does MUFG Investor Services help firms with these challenges?
We combine the power of fully multi-broker/dealer electronic execution and full transparency to ensure our clients obtain very competitive prices and adhere to best execution under MIFID II. With most other providers, you are confined to their pricing and if you manage the FX hedging on your own, it could get expensive if you are not an expert in these transactions.
Our MUFG FX Overlay solution is a comprehensive, cost effective and transparent currency overlay hedging solution, designed to mitigate risks related to FX exposures within a portfolio or hedged share classes. Our service is fully automated, flexible, and cloud-based and allows you to tailor every aspect of your FX overlay program across the entire lifecycle of a hedge, including hedge ratios, hedge frequency, NAV triggers, tenors, and execution methodology.
What are the key areas of focus for you next year?
We are passionate about continuously improving the client experience, so we spend a lot of time and focus on ensuring clients love what we do for them.We are also focused on scaling up the service, both in terms of features and capabilities.
What’s been some of the feedback you’ve received from clients on the service?
Our clients love the transparency and cost efficiency. With other providers, you don’t always know if you’re getting the best price or if everything is working the way it should. We provide clients with a solution that works, and risk is transferred to us, so clients can focus on their core business and services. Cost efficiency comes down to how you enter the market, and we have deep experience trading FX and providing passive currency overlay. We’re able to get passive currency overlay right so that our clients don’t need to spend a lot of time and take on the operational risk that comes with doing it themselves.