Best Bank Awards: NatWest Markets

What the foreign exchange prime brokerage (FXPB) space has undergone in the past year is nothing short of revolutionary.

The shakeup at the top of the PB pyramid not only changed the landscape, but new entrants not normally associated with the business began to filter into the space because they must post initial margin for trades under thresholds set by non-cleared margin rules.

The transformation began earlier this year, when Citi, the dominant FXPB on the Street, decided to recalibrate its FXPB services and offboard several firms that no longer fitted its model. This created opportunities for some of the bank’s rivals, many of whom eagerly capitalised on the opportunity.

Marcus Butt, global head of prime services and futures at NatWest Markets, says the UK bank was a natural beneficiary of the exodus because its FXPB services had earned a reputation for consistency.

“A prime brokerage relationship is a long-term relationship,” says Butt. “When people are making those long-term decisions, they need to understand that the people they are looking to partner with are committed to the business and are comfortable with the businesses they run.”

NatWest Markets was voted Best bank for post-trade services at the 2019 FX Week Best Bank Awards – for the fifth year in a row.

One difference between NatWest Markets and its peers, says Butt, is that “we don’t just run a vanilla prime brokerage service – we build solutions for individual clients”. Many of the bespoke solutions the bank is asked to design do not fit into what could be characterised as a standard PB offering.

“We are known in the market as a very high-quality provider, and people who are not getting what they want from their existing providers tend to come to us and ask us to look at what we could do to help,” he says.

The netting they can achieve by pushing their flow through a prime broker means they can substantially reduce their margin requirements

Marcus Butt, NatWest Markets

It isn’t only those who have been let go that are seeking new PBs. Butt says many other market participants are prudently seeking the services of a second PB to cover themselves because of concerns about the long-term commitment of their primary PB.

New types of market participant are also entering the PB fold. Asset managers who have not traditionally needed brokerage services are now knocking on NatWest Markets’ door, as the result of regulatory pressures in the form of non-cleared margin rules.

As the threshold for falling into scope of the regime is coming down each year, asset managers are seeking the services of PBs to benefit from the efficiency of netting as a means to reduce the amount of margin they need to exchange.

“They need FXPB because it acts as a fulcrum for all of their flow,” says Butt. “The netting they can achieve by pushing their flow through a prime broker means they can substantially reduce their margin requirements.”

Asset managers are also drawn to PBs because their operations are increasingly being affected by best execution requirements, and “for those that have a best execution requirement, what better way of achieving that than having more access to the entire market?” Butt concludes.

The full list of winners of the 2019 FX Week Best Banks Awards