Fourteen leading financial institutions have significantly reduced the cost of processing foreign exchange trades over the past two years, according to the results of a study released last month.

The research, recently completed by Benchmarking Technologies International, a unit of Swiss Bank Corp., is the second such study conducted in the past two years covering foreign exchange operations, officials said. The objective of the study was to compare the foreign exchange operations of industry peers in North America and abroad.

In addition to Swiss Bank, other companies participating in the study included: ABN Amro, Bank of America, Bear Stearns, Chase Manhattan Bank, Chemical Bank, Citibank, Credit Lyonnais, Credit Suisse, J.P. Morgan, Royal Bank of Canada, and Union Bank of Switzerland.

Processing costs among this survey group were 31% lower than among the group surveyed two years ago. Among institutions that participated in both surveys, costs were reduced by 21%, Swiss Bank executives said.

"We have seen a vast improvement in the processing costs for nearly all the participants," said Juliet Kontaxis, director of operations at Swiss Bank Corp. and manager of the study.

Ms. Kontaxis said the latest study found that the cost of processing a currency-exchange trade continues to vary greatly between institutions.

The processing cost per transaction at the most efficient organization surveyed was $1.27, while the high-cost processor came in at $9.87. The average cost among the survey group was $4.61. While costs for the most efficient organization were about the same as in the last survey - $1.26 per transaction - the high cost in the last study was $17.62 while the average cost stood at $6.74.

Swiss Bank officials said most of the participants in the original study are now employing so-called straight-through processing, a system identified as the most efficient in the first study.

Straight-through processing minimizes the steps and the paper trail between trade execution and settlement, greatly reducing the possibility of errors.

By streamlining the order flow from trader to back office, straight- through processing has also driven down the cost of trade reconciliation, the study found.

Along with the lower transaction costs, banks greatly improved their employee productivity figures. As a group, there was a 14% increase in trades per processing staff per day among those institutions that participated in both studies. The best-performing institution saw staff processing an average of 319 trades per day, while the least efficient institution achieved a level of 22 transactions per employee per day. The average among those surveyed was 97 transactions.

"As management has employed new organizational strategies there have been substantial improvements in staff productivity," said Ms. Kontaxis.

"Citibank has adopted numerous best practices such as gathering internal benchmarks from different Citibank units," said John Spadaro, vice president of Citibank. "We also can measure ourselves against our industry peers."

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