The single-dealer platform provider beats off stiff competition to take the 2014 crown for best trading technology vendor.
Technology has allowed a handful of banks to build and consolidate their position at the top of the FX-trading tree, leaving many regional banks to abandon their market-making operations and sign up as customers with the big boys.
The same relentless advance in financial technology is now reopening the door to the very same players, who are now able to hold their own in their local currency and quote prices to the same institutions that pushed them out of the way in the first place.
The re-emergence of regional banks as market-makers is a trend that the winner of this year's 'Best trading technology vendor' category knows a fair bit about. Caplin Systems primarily specialises in providing customisable, single-dealer platforms to regional banks, which, during the evolution of electronic FX trading, were unable or unwilling to shell out monstrously large amounts on building their own distribution systems, often looking at final bills in excess of $100 million.
"It's a lot cheaper than it used to be to develop a lot of these systems. As we have more experience, we take more of our engagements to clients with customisable options that are already built rather than producing something from scratch. We can deliver and install much more quickly than before," says John Ashworth, Caplin's recently appointed chief operating officer.
Market conditions are arguably favourable for those vendors providing technology solutions in financial services. The intense focus on the bottom line and keeping costs under control in the fiercely competitive FX landscape has led many banks to outsource their development projects.
"Due to a lack of market activity, depressed revenue and significant regulatory costs, banks are increasingly looking to turn to a vendor such as Caplin to keep strategic technology developments on track, to stay competitive and serve their customers. While the larger banks are still focused on outsourcing sub-components for their overall technology solution, it's very much the case that the super regionals and regionals are looking to outsource large chunks as a solution to the vendor," Ashworth says.
He adds that instead of spending hundreds of millions of dollars, market participants can commission a credible, multi-asset class offering with a budget of less than $10 million.
"Whilst we still supply some of the top-tier banks with a number of technology components, the very large banks will always want to own as much as possible, but, equally, they're exiting from non-core businesses and might have been approaching them by joint venture or on an agency basis, so maybe a vendor solution is appropriate for those sorts of applications. But, most of our growth comes from providing e-distribution solutions to second- and third-tier banks," says Ashworth.
Caplin's customers like the company's commitment to delivering projects faster and cheaper than its competitors.
"We have been impressed with Caplin's willingness to work on site and the amount of technology that was pre-built, meaning we could get to market a lot faster," says one head of FX trading in London. "We looked at others in the industry, but chose Caplin, based on those factors as well as price."
Looking ahead, Ashworth sees the development of mobile technology as a key growth area for Caplin, particularly in Asia. Several major banks already offer such functionality, but appear to be at various stages of their development in comparison to what is currently available in retail banking.
"People want things done now. Technology is moving forward all the time and mobile technology is a huge growth area – it's definitely more than just a gimmick. We were in Singapore recently and noticed people there are a lot more technology aware and the adoption of mobile is not even a debate any longer," he says.
"There are various regulatory demands placed on banks about what they can and can't do, and banks saying they're not ready to offer mobile trading to do this yet. So, on that basis, the initial user case for a mobile offering might enable users to review outstanding orders, view a portfolio or look at charts, but real-time execution might be phase two or three in mobile technology's development. However, there is definitely an appetite from people in the market for these types of solutions," Ashworth adds.