Integral and Jefferies partner to reduce buy-side trading costs with TrueFX

By centralising credit, liquidity and technology, costs could drop by up to 80%

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All in one: with TrueFX buy-side market participants no longer need separate prime broker, technology and credit solutions

Foreign exchange technology company Integral is partnering with FX prime broker Jefferies to bring to market a service that will reduce the cost of trading FX by up to 80% for buy-side market participants by making it easier for them to access credit and liquidity.

Consolidating liquidity provision and credit intermediation into a single new service, dubbed TrueFX, reduces the market inefficiencies inherent in providing each facility individually.

Buy-side market participants therefore no longer need to search for a prime broker, a technology solution and develop liquidity relationships separately because TrueFX brings these together as part of a central clearing venue.

“The flow of credit is the lifeblood of the FX market, but market inefficiencies have stalled accessible and affordable credit for many market participants,” says Brandon Mulvihill, global head of FX prime brokerage at Jefferies, the firm that will serve as the credit intermediary for the TrueFX platform.

To address this challenge, TrueFX brings together providers of credit, technology and liquidity into a unified and consolidated solution for the benefit of customers, explains Harpal Sandhu, founder and chief executive of Integral. Customers are expected to predominantly represent retail brokers, macro hedge funds, prime-of-primes and small and medium-sized regional banks.

Harpal Sandhu, Integral

“By having customers face off against a central counterparty and not having to pay external clearing and settling costs, TrueFX is able to reduce the prime brokerage fees to customers by at least 50%. And in some cases greater,” explains Sandhu. “When you add to that that there is no per ticket charge, their actual per million cost could be reduced by 80%.”

While Integral is not charging any fees for the buy side to use the platform, it will continue to charge liquidity providers to use TrueFX. Scale is, therefore, central to the model being profitable.

“Our benefit is scale in that we can deliver a single system with a group of really solid partners who bring a tremendous amount of business to the platform,” Sandhu says. “Yes, we make half as much money, but if we do twice as much or hopefully five times as much business we increase revenue.”

“It costs a lot of money and thousands of servers in multiple data centres, but it’s a fixed cost, our incremental cost is relatively low. So the way we make this business model work is to do it at scale. The beauty of this is that since Integral is already at scale, we can deploy this relatively easily.”

Sandhu says market participants do not need to change the way they do business if they wish to use the new platform. They can continue to trade with certain counterparties in whichever way they choose. He adds that since Integral knows how different market participants fit together, it was able to pre-build the platform in the cloud at scale, thereby reducing costs significantly.

In addition to being more convenient for buy-side participants, Sandhu believes TrueFX will lead to substantial growth in the market because if their costs go down by 50%, their increased profitability will allow them to offer more products to their customers in return.

“Bringing together a strong prime broker with a strong technology provider and a really diverse group of liquidity providers is not rocket science, but the reality is nobody’s done it,” Sandhu says.

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