e-FX Awards 2020: Best prime broker – BNP Paribas

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European bank BNP Paribas offers stability and partnership in FX prime brokerage, doubling revenues and tripling the volumes it handles over the past 18 months

Kieron Smith, BNP Paribas
Kieron Smith, BNP Paribas

Turbulence in the FX prime brokerage landscape has unfortunately been a recurring theme for a number of years. As FX prime brokers have come and gone over the past decade, and others have been compelled to recalibrate their operations on the back of significant losses, market participants who rely on the services of these prime brokers have come to value security and stability above all.

 It is unsurprising, therefore, that the capacity of a prime broker to weather stormy waters is a feature market participants now value greatly.

 While FX prime brokerage has historically been concentrated on an extremely dominant player with a scattering of smaller prime brokerages, the shake-up of late 2018 and early 2019 saw a redistribution of clients from that dominant player to other prime brokerages.

One of these was BNP Paribas. The European bank has been active in the FX prime brokerage space since acquiring AIG Financial Products’ FX prime brokerage platform in 2009 in the aftermath of the global financial crisis.

The platform evolved methodically over the ensuing years in a stable and composed manner.

While they might not have been top of mind to all market participants before the most recent shake-up in the FX prime brokerage space, Kieron Smith, deputy global head of prime solutions and financing at BNP Paribas, says that stability and security are now very attractive features.

“Pre-crisis, I’m not sure this was valued quite so highly by clients,” says Smith. “Post-crisis, it was a very high factor in terms of their decision making.”

“We are a very stable bank,” he says. “Clients know that when they come to us they are going to have an incredibly stable partner with a very heavy focus on risk management. Clients welcome that approach. The reaction of clients now is very healthy. They want a very risk-conscious bank to provide for them because they know that this leads to a stable bank and a partner they can rely on.”

This stability and steadiness has served the bank well. The investment made by BNP Paribas in its platform and human capital over the past few years has led to a doubling of revenues in its FX prime brokerage business and a tripling of the volumes it handles in the past 18 months.

Voted best prime broker at the 2020 FX Markets e-FX Awards, BNP Paribas’ FX prime brokerage platform services a diversified client base that comprises hedge funds, asset managers, banks, non-bank liquidity providers and agency brokers.

The bank is optimistic about the prospects of its FX prime brokerage franchise. The bank continues to add to the platform’s resources with a horizon of three to five years, explains Nathaniel Litwak, global head of FX prime brokerage at BNP Paribas; it expects growth north of 50% over the next two years as client opportunities continue to materialise and the pipeline is strong.

BNP Paribas is very committed to FX prime brokerage,” highlights Litwak. “We have invested in IT resources and have added client services and documentation resources.” 

Litwak is not overly concerned about the potential impact of the non-cleared margin rules on the bank’s FX prime brokerage business when the last phase takes hold in September 2021. He acknowledges that FX clearing will certainly get a boost from an increasing number of clients being required to post initial margin on the portion of their trades that fall under the regulation.

“We haven’t seen the tipping point for clearing yet,” he says, “but as more clients are in scope I think there will certainly be a lot more interest in clearing, but whether that translates into further business remains to be seen.”

As clearing is an integral component of BNP Paribas’ FX franchise, Smith and Litwak maintain that the bank stands at the ready with the appropriate FX solutions its clients may require in the years to come, whether that includes needing prime brokerage services, clearing, or even access to listed FX futures. 

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