Best prime-of-prime broker and Best retail FX platform: Saxo Bank

Best prime-of-prime broker and Best retail FX platform: Saxo Bank
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Saxo Bank bags two awards at the 2022 FX Markets e-FX awards

Celebrating 30 years since its creation in September 2022, Saxo Bank began offering FX prime brokerage (FXPB) services to a select number of clients, a move that is part and parcel of Saxo Bank’s strategy to continually expand the range of products and services it offers. Saxo has transitioned from a purely FX retail broker when it was founded in 1992 to a global investment banking company with arguably the most sophisticated multi-asset platform on the Street.

Over the past 30 years, Saxo Bank has grown alongside its clients, and today offers more than 60,000 listed and over-the-counter (OTC) cross-asset products, recently adding cryptocurrencies, structured products and margin lending on cash products. The bank’s decision to broaden its institutional FX services towards more traditional FXPB demonstrates its dedication to its FX roots and confirms its willingness to meet the expectations of a maturing industry.

“Our commitment to FX is as strong as ever,” says James Dewdney-Herbert, institutional FX sales at Saxo Bank. “We envisage playing the role of a traditional FX prime broker, namely through the provision of credit and clearing services, to facilitate bilateral trading relationships. We won’t take a right angle and turn away from prime-of-prime, but we see value in providing a traditional credit-based FXPB service while continuing to offer managed liquidity side by side.”

James Dewdney-Herbert
James Dewdney-Herbert

For Saxo Bank, extending a credit- and clearing-only service is as much about adding value to its existing client base as it is engaging a new audience. The bank will continue to focus on its institutional remit of banks, brokers and wealth managers, but with the requisite proposition to capitalise on opportunities with more established clients, typically with more nuanced liquidity needs.

Saxo Bank is poised to leverage its keen understanding of business-to-business-to-client dynamics and the technology and service expectations of the globally significant intermediaries it serves. The bank recognises that substantial users of FX liquidity expect flexibility in the services their partners offer. Greater control of relationships with executing brokers and liquidity venues will be attractive to many.

“As clients in the industry mature, they want to take more control of their business,” says Dewdney-Herbert. “That’s why we feel that facilitating disclosed trading relationships, focusing on the provision of credit and clearing over our celebrated technology stack could be a better value proposition to our clients. This is in keeping with Saxo Bank’s own development journey from our start-up as an online broker in 1992 to a global investment bank in 2022.”

He emphasises that venturing into FXPB is not abandoning a community that Saxo has served for 30 years, instead being able to serve clients better now they are further along the business cycle. Saxo Bank believes FXPB is a meaningful way to deepen existing relationships but also better leverage its single counterparty, multi-asset proposition for new partnerships.

“Saxo Bank’s ultra-sophisticated technology stack is leveraged by various tier one banks and wealth management clients via white label – we process up to 2.5 million trades a day, significantly more than 3,000 trades a second in fast markets,” he says. “Offering those big clients disclosed, bilateral trading opportunities and access to major liquidity venues, together with our own managed liquidity, completes a compelling proposition where synergies of scale can be capitalised on by both parties.

“We feel uniquely experienced in serving a maturing retail brokerage industry as we have become a more mature intermediary ourselves within that same space. Our clients’ development curves are components of our own DNA. I am excited that, going forward, we will be able to provide traditional FX prime services alongside our existing multi-asset API [application programming interface] business covering cash equity, fixed-income, FX, listed and OTC derivatives.”
 

Conditions right for an FXPB roll-out

Current market conditions are particularly well aligned for rolling out an FXPB solution. Volatility has returned after more than a decade of record lows, with high inflation, increasing central bank activity and geopolitical uncertainty driving greater volumes. Saxo’s new FXPB offering will initially cater to the spot market, but over time will expand to FX options and non-deliverable forwards (NDFs).

“With volatility back, we can unlock many of the capabilities we already have in FX,” continues Dewdney-Herbert. “We have a liquid FX options product mainly used by funds, family offices and high-net-worth investors, but it is something that can become more relevant as the retail industry matures. Retail investors are increasingly losing directional bias in favour of using options to trade volatility … such as professional traders.

“Currently, we trade NDFs on a voice-only basis but, as we extend our commitment to local markets, and Saxo Bank’s new FXPB proposition gains traction, I hope we’ll be able to start streaming NDFs electronically and add FX options to our API. Ultimately, our goal is to become a fully fledged FXPB and FX liquidity provider – not just in the cash market, but also in the world of derivatives.”

Saxo FXPB aims to serve liquidity users, providers and the raft of new hybrids that simultaneously do both. Banks, non-banks and multi-provider venues can access existing relationships and receive introductions to new ones, but also – subject to know-your-customer/due diligence – collateralise new clients they want to quote to clear at Saxo Bank FXPB. This business aims to serve the industry and help its participants drive new revenues, creating a win-win for liquidity users and providers alike.

 

Saxo Bank was named Best prime-of-prime broker and Best retail platform at the 2022 FX Markets e-FX awards.

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