Automating FX Dealing for Efficiency and Control
Treasurers of companies globally are increasingly leveraging the opportunity to transact foreign exchange (FX) and other transaction types online in order to obtain competitive bids from multiple banks, achieve higher levels of straight-through-processing (STP) and increase the auditability of decision-making. Jochen Hörth, Head of Treasury of Coutinho & Ferrostaal GmbH talks to the Editor about the company’s use of electronic dealing.
Could you give us an overview of your company and its activities?
Coutinho & Ferrostaal was founded on 1 January 2008, the merger of the steel trading activities of CCC Steel GmbH & Co. KG and the Ferrostaal Metals Group. The merged company was recently wholly acquired by Grupo Villacero.
As a globally positioned service provider in the international steel trade, Coutinho & Ferrostaal is a leader in the industry. With more than 300 employees at 56 locations in 34 countries, the firm has comprehensive expertise in all major steel markets, and procures and markets steel in every region of the world. In addition to trading crude steel, semi-finished and other miscellaneous steel-related products, it offers its business partners an integrated and customised package of value-added services covering the entire metals supply chain, from exploring new markets to financial engineering to logistic services.
Coutinho & Ferrostaal has a central treasury function based in Hamburg, Germany, and focuses primarily on cash management and foreign exchange hedging.
What was your motivation for electronic FX dealing?
Hedging foreign currency risks is an essential and integral part of our treasury activities. We take an order-based micro-hedge approach to hedging (i.e., each exposure is hedged individually), so a large number of trades need to be processed each day. To achieve operational efficiency, accuracy and control, we needed an automated approach to FX dealing that enabled a high level of STP and systems integration.
Why did you choose 360T?
Firstly, 360T offers coverage for all the banks with which we deal FX. We have found it to be a secure, reliable platform which is easy to use. In addition, the vendor has proved to be responsive and service-oriented supplier. Another advantage is that 360T provides comprehensive information on both quoted and executed deals.
How do you manage your FX deal process flow?
We conduct all FX dealing on behalf of Coutinho & Ferrostaal entities centrally from our Hamburg treasury function, where most of the FX hedging requirements arise. Requests from group companies (such as in United States and Canada) are sent to treasury through a separate process, although ultimately we intend to streamline and integrate this activity. Due to the nature of the steel trading business, given tolerances and timing issues, aligning order-related FX cash flows and hedges can be challenging. 360T helps to limit the additional workload arising from a high volume of hedge transactions.
How have you integrated 360T with your in-house technology?
Our system integration requirements were straightforward as we only needed to import deal tickets into 360T through an XML file. We have not yet automated the export of deal tickets, but this is an enhancement to our process that we may consider in the future.
What have you found to be the key benefits of online FX dealing?
Increased efficiency is a key benefit of online dealing, offering greater STP and reducing manual intervention. We have found that online dealing is robust and secure, and offers an extensive audit trail.