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Outsourcing Derivatives: An International Trend That Makes Good Business Sense

Advantages of using WSD's derivatives solutions include:

Approximately 95% of medium sized and community banks in the U.S. outsource foreign exchange services and Derivatives trading to financial institutions. A similar trend is occurring on a global basis. Many have concluded that it's best to outsource such derivatives trading in FX, Commodities and Metals to companies that specialize in such  processing, products and services as their specialize in providing such solutions not only by way of IT and software but also to overall turnkey solutions which are considered end to end but most of all risk management and infact overall project management at a flick of a button. There are two main reasons for this line of thought. First, it's the Derivative specialist, not the bank or financial Institution that's making the initial and recurring resource investments. Secondly, the Derivative specialist assumes the responsibility for managing these resources and for much of the business risk.

Reasons for Outsourcing Derivative Services

Many businesses currently involved in foreign exchange (FX), metals and commodities either on the buy, sell, retail or wholesale side are succumbing to escalating costs and thinning profits. Despite tremendous growth in existing and emerging global FX and other derivative markets, increased competition and direct costs are becoming disproportionate to profitability. With tapering profits and the cost of management, risk, compliance and technology constantly on the rise, institutions are reconsidering both the feasibility and necessity of offering derivative products and services. As an alternative, institutions are now outsourcing derivative trading to companies such as WSD NZ to improve balance sheets, increase profitability, introduce new revenue streams, maintain client confidentiality and share holder confidence.  In emerging markets such as India where many Institutions have large client bases but don't have the wherewithall to enter into derivative business even if they have the capital resources.  WSD is there the perfect partner that can come in and start this division or product for the company considering the business with little or no investment but with joint management capabilities between WSD and the Institiution wishing to get into the business.

Banks and Financial Institutions

Whether as a "free" or "fee-based" product offering foreign exchange services or derivatives trading can enhance a financial institutions revenue stream while meeting a market need. Yet, the costs for creating a derivative processing environment (from a technical, compliance, back office and human resource perspective alone) can be enormous. As such, banks and financial institutions are under constant pressure to keep overhead costs to a minimum so they can focus resources on developing new profit opportunities. On the other hand, there are many smaller institutions that do not have an Derivative or FX facility despite the necessity and demand. Their risks are different yet substantial. If clients require derivative services and their bank does not offer them, their clients will have no choice other than to patronize a competitor that does. The opportunity cost for the bank is not only the loss of a customer's business but the potential loss of their deposits and loans as well.

As a derivative and foreign exchange specialist, WSD provides unique, safe and sound solutions for institutions that offer FX, Commodity and metal derivative products but whose costs are outpacing profits as well as banks that do not offer such services but need this as part of their product arsenal to meet client needs, fend off competitors and create a new revenue stream.

Why Outsource to WSD Instead of a "Partner" Bank?

The most important reason for choosing WSD to outsource your derivative and FX is because WSD is not a bank or an NBFC.

Banks and financial institutions must evaluate the competitive threat a correspondent bank or NBFC or alternative provider poses when outsourcing because they may have access to confidential customer banking information, whether institutional or personal. This poses a threat not only to a customers' right of privacy but to the bank who must protect their customers anonymity and the banks' assets from being directly or indirectly solicited.
Even if a bank has a correspondent relationship with a partner bank, the partner bank may not be able to offer customers the greatest rates of exchange which will translate into less profit on your bottom line. The partner bank may not also offer a full line of derivatives and FX services that customers require, once again putting those customers entire business portfolio at risk of loss to a competitor.

Since WSD is not a bank or NBFC, WSD is not a direct competitor. We are a licensed, regulated non-banking financial institution that handles purely derivative brokerage globally and solutions provision including white label services that values the sanctity of confidentiality and provides transparent value-added derivatives and FX products, services and turn-key outsourcing solutions.

Think of WSD as your derivatives division to reduce overheads, increase profitability, create new business opportunities, protect your client list and save capital investment costs AND MOST OF ALL TO MANAGE YOUR RISK!!

Corporate Customers

For corporate customers, WSD's outsourcing services provides a complete global payment and foreign exchange back-up for their clients – including foreign currency transaction processing.

WSD also provides private branded partnership agreements where you gain the benefits of WSD's turn-key on-line foreign exchange (and derivatives) products and services without the burdening costs related to building and maintaining a sophisticated infrastructure.

WSD's Outsourcing FX solution offers direct access to a diversified global payments product line to service all of your current and future customers international currency needs. Our flexible state-of-the-art online system WSD Direct offers instant access to a full-service trading desk without substantial capital investments.

Key Reasons to Choose WSD as your Derivatives and FX Outsourcing Specialist
•    Increase revenue and profits derived from "fee" or "free" based services
•    Improve operational efficiencies and productivity levels by outsourcing administrative tasks
•    Deliver new value propositions to customers to enhance business relationships
•    Expand service lines to capture more business from existing customers
•    Achieve more competitive exchange rates through wholesale purchasing
•    Control costs and maximize investment capital - if cash is not tied up in capital expense, it can be reinvested in areas offering greater ROI
•    Leverage the Internet to streamline and automate FX products, services and processing transactions
•    Acquire industry expertise and expedite market entry
•    Enhance account management through real-time management reports on the purchase, sale and trading of foreign currencies and income generated from each product

WSD's Credentials: Experience, Global Acuity and Security

Experience & Global Acuity

With its world headquarters in Auckland NZ and offices in the U.S., UK, China, Africa, Dubai and Thailand, WSD Global Markets Ltd. is one of New Zealand's leading FX and financial services companies. WSD's management team consists of multi-lingual experts with over 100 years of experience in global FX and derivatives.
WSD provides comprehensive FX outsourcing products and services including 24-hour access to multiple sources of information, liquidity and prices in the world's OTC and exchange-traded currency markets. FX products include spot, forwards, options, exotics and EFP's (exchange for physicals).

Security

Unlike many countries that do not provide adequate protection for client funds, New Zealand has a strong regulatory framework that is strictly enforced. Client assets are protected by "Segregation" laws where client funds are deposited in segregated bank accounts. This ensures that client assets are never co-mingled.

Further asset protection is enforced in NZ by requiring regulated, licensed companies like WSD to provide professional indemnity insurance coverage for the protection of client and company assets against unforeseeable events that if left uninsured, may result in the loss of client funds.

Under this system, clients are secured to the extent that WSD is regulated under NZ and licensed under both NZ and U.S. laws. The professional indemnity insurance policy in effect acts as an added layer of protection for client assets and is one more important reason why WSD is the right choice for outsourcing your derivatives and FX products and services.

WSD Global Markets LTD (NZ) Limited Accreditations

Authorized Futures and Options Firm by New Zealand Exchange Limited

Authorized and Regulated by the Securities Commission.

Full Broker & Clearing Member of the Dubai Gold Commodities Exchange

WSD Global Markets Limited is a registered branch office of Wall Street Derivatives Inc, USA ( www.wsd-usa.com ) which is registered as a Futures Commission Merchant (FCM) with the CFTC and a member of the NFA.

WSD: The Right Outsourcing Solution Specialist

Numerous banks face similar dilemmas.
•    They have a critical process with increasing cost and decreasing profits
•    They require significant investment in new technology in order to compete
•    They must decide on spending money on technology investments and human bloating overheads or outsource

Outsourcing Derivatives and FX to a company that specializes in a service to manage resources like WSD will allow your bank to focus on their core competencies and bottom line. Operating costs will be reduced because of the specialized knowledge and economies of scale of WSD's resources. Capital costs will be reduced because WSD is making the capital investments, not the bank. Furthermore, it's faster and less expensive to leverage WSD's existing resources than it is to build it from scratch. By outsourcing FX to WSD, your bank will be able to invest more of its internal resources in core areas and produce exceptional returns.

It is imperative to choose an outsourcing service provider that can put all the pieces together. WSD can provide a comprehensive, fully integrated solution that will benefit your bottom line and allow your bank to remain competitive in the 21st century.

About the Author

Graig Jackson, a consultant for Foreign Exchange, Outsourcing Solutions and Outsourcing Derivative Services.

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