CFH Clearing – helping brokers and banks to improve their profitability and efficiency

e-Forex talks to Lars Holst, CEO of CFH Clearing, who explains how the organisation has evolved to be so much more than a leading STP venue for Tier 1 liquidity.

First Published: e-Forex Magazine 60 / e-Forex Interview / April, 2015

Lars, please tell us a little about your background and career path to date within the FX industry.

I have worked in the FX industry for almost 20 years and have extensive experience in banking and e-FX technology. Prior to co-founding CFH Clearing, I was European Head of Currenex’s (StateStreet Bank) Margin Trading Group, responsible for product development and growing the business. I have also spent a couple of years with Dresdner Bank, primarily as Head of e-FX Sales and then interim business head of the FX Prime Brokerage team, and held various leadership roles at Saxo Bank early on in my career. 

What are your primary job functions and day to day responsibilities within the company?

As CEO of CFH Clearing I am ultimately responsible for all aspects of the business. Day to day, I generally spend my time either on the phone, in team meetings or with clients, making sure that we’re performing well, hitting targets and planning for the future.I work at our London headquarters which, for CFH Clearing, is where our sales, service, legal and finance teams are predominantly based. However, I also travel to our other offices around the world, ensuring that we are leveraging key opportunities around the globe and providing clients in different territories with the products and services which meet their exact requirements.The best part of my job is talking to clients and partners to gain an understanding about their businesses. Everything we do is based on client feedback so it’s really important to spend time with clients, understanding their needs and focusing on how we can help them. 

What types of clients and trading firms does your team mainly work with and what are they looking for in a Prime Broker?

Our client base includes banks and brokers, white label partners, funds and investment managers and proprietary traders. They all partner with us to grow their businesses, be more profitable and operate more effectively.They come to us for the quality of our products and services and particularly value our focus on high service levels, flexibility and reliability. We are authorised and regulated by the FCA. This gives clients across the globe peace of mind that we are a reputable and professional organisation which operates under the jurisdiction of the best regulatory regime in the world.

CFH Markets changed its name to CFH Clearing in May 2013. Has that proved to be a wise decision?

CFH Markets was founded in 2008. As our business evolved, we moved away from simply providing our own liquidity pool to having a greater focus on facilitating access to trade with the biggest banks in the world.  

We changed our name to make it easier for clients to identify and recognise our core offering – providing the most transparent and direct gateway to the interbank market. The new name was more appropriate for our current and future business model, emphasising our role on the credit and clearing side.

The name change has been very effective, reinforcing our position as a premier institutional prime of prime broker, which facilitates access to the professional space.  It also reflects our values of being ‘clear’ and transparent to clients.  Since the name change, we have become much more widely known not only as a market leading prime of prime liquidity provider but also as a respected organisation which provides brokers and banks with low clearing costs and state-of-the-art technology.

The CFH Clearing team

The CFH Clearing team

You have clearly evolved the business considerably since you first launched. Do you now cover all broker requirements?

We offer full service brokerage solutions, enabling clients to benefit from one back office, one risk management dashboard, one prime of prime account as well as having access to multiple liquidity venues and a choice of front end platforms.

Whilst we offer a ‘one stop shop’ for brokers, they can also select individual aspects from our portfolio – so we have clients who just access our competitively priced liquidity or just use our ClearVision trading technology as well as many clients who reap the benefits from utilising our full range of products and services.

Transparency has always been at the heart of our offering – and we believe in giving clients the freedom and flexibility to choose the aspects which best suit their specific needs.

CFH Clearing – helping brokers and banks to improve their profitability and efficiency

In the past you have talked about CFH Clearing’s ‘sweet spot’ being the start-up or adolescent broker. Is that still the case? 

Whilst we work with institutional clients of all sizes, including some of the world’s biggest and most prestigious banks and brokers, I think that you could describe our ‘sweet spot’ as the start up or adolescent brokers. This is largely because we can offer all the tools to help them to take their business to the next level. We’ve seen these clients really grow with us, resulting in a significant increase in volumes. And as our clients grow, we do too.Start-ups and early stage brokers welcome the fact that we offer entry level in a clearing relationship combined with a ‘broker in a box” solution, providing everything they need to operate in an increasingly complex environment. They have access to something which not only has been tried and tested but also gives them a competitive edge.We offer a variety of White Label front end platforms, giving clients the choice of platform features and functionalities to pass onto their own clients. These platforms all connect up to our ClearVision back office suite and tailored liquidity - providing an easy and effective ‘turnkey’ solution. 

What range of services and products does CFH Clearing now provide? 

We have three areas of the business, which are all backed up by high quality 24x7 service.

1) Prime Brokerage: As already highlighted, we offer a reliable and cost effective way for clients to access institutional pricing and products. We are one of the leading STP venues in the world, connected to the top tier 1 banks globally. We allow clients to trade with these banks via a margin account or prime broker.

CFH Clearing provides access to a wide selection of liquidity pools, including bank, non-bank and ECN venues and we have worked very hard with our liquidity partners to ensure we have a compelling offering for our clients in terms of tight spreads and depth of market.

2) Proprietary Technology: Our ClearVision technology suite provides all the necessary infrastructure to effectively manage a trading operation. It gives brokers and banks access to a full range of trading and back office tools. Our reporting suite in ClearVision meets the standards of the most stringent regulatory regimes including the Japanese FSA and the Turkish SPK.

3) Multiple Front Ends: We also offer a wide variety of front end trading platforms to cater for all types of traders, including our proprietary fronts ends, ClearPro and ClearWeb, as well as Tradable, the world’s first app-based trading platform which has seen huge success in the last 12 months. We believe the future is mobile and have invested significant resources in ensuring we connect to the best mobile solutions in the market.

CFH Clearing – helping brokers and banks to improve their profitability and efficiency

CFH Clearing is clearly experiencing significant success. What do you attribute this to?

We have certainly been experiencing rapid growth over the last few years and have seen a huge rise over the last 12 months. We are reaping the benefits of significant investments we have made in our people, our infrastructure and our own ClearVision technology. We have a continual focus on ensuring that we lead the market, providing clients with everything they need in terms of liquidity, clearing and technology in order to operate effectively and maximise profitability.

I think a major part of our success is due to our global focus and local expertise in key markets. We have reinvested profits back into the business to fuel further growth – for example, we made a major investment in our infrastructure by moving our matching, order and execution system to LD4 to enable our clients to benefit from the reduced latency and cost efficiencies from being based in the same data centre as many of our London-based clients and liquidity providers. This went live in March and really takes our offering to the next level.

Where are you currently seeing your client base increase? 

CFH Clearing has over 400 institutional clients in more than 80 countries who use either our liquidity or our technology, or both. We are seeing particular growth in Turkey. We have partnered with one of the biggest and most respected Turkish brokers, Sanko Menkul Degerler. ALB Menkul Degerler, another leading and hugely prestigious Turkish broker, has taken both our liquidity and technology.

We are also experiencing huge growth in Far East Asia, particularly in Japan. CFH Systems has offices in Hong Kong and Tokyo to focus on the sales and support of ClearVision and we are seeing an increasing amount of interest in our offering in the region. Asia is a key territory for us moving forward and we have ambitious growth plans. CFH Systems has recently entered a direct internet peering agreement with China Unicom, the leading Chinese internet provider and, as of this month, our clients can benefit from our investment in dedicated fibres between London and Beijing. This means that we can offer our clients the fastest, most reliable routes with the lowest possible latency when trading between China and Europe. I think this will have a major impact on our continued growth in Asia.

CFH Clearing – helping brokers and banks to improve their profitability and efficiency

CFH Group has announced plans to consolidate the STP /Prime of Prime space, investing in small to medium-sized brokerages with an institutional focus. What has triggered this? 

We are now in a position to capitalise on opportunities created by the recent SNB events and CFH Group plans to acquire or invest in smaller players, consolidating the market under one balance sheet, one common technology platform and one common infrastructure. Recent SNB events have really shaken up the market and will inevitably lead to cost increases to prime brokers, higher margin requirements and bigger balance sheets. As a result of this, we believe that the time is right to implement this new consolidation strategy, creating a situation in which all parties will benefit.

How does being part of the CFH Group impact the CFH Clearing business? 

There are a lot of opportunities that we can leverage from sharing contacts, ideas, expertise and resources. Our clients benefit from the economies of scale we gain from being part of the CFH Group, particularly in terms of the sophistication of our technologies and the cost efficiencies.

Many FX brokers suffered huge losses as a result of the sudden SNB announcement in January. How did CFH Clearing fare on that day? 

I have never before witnessed a move of such magnitude as we did on Jan 15th ‘Black Swan Day.’ Fortunately for CFH Clearing, we weren’t seriously affected – not only because we have fully automated systems and market leading risk management solutions but also because our technical infrastructure was robust enough to cope in such extreme market conditions. In addition, we have the right people and the right relationships to cope with extreme situations and market events. It’s also worth noting that all our clients are professional and institutional, and we operate under stringent guidelines, providing competitive pricing on sensible trading terms. This, of course, minimised any impact.

Our volumes were at an all-time high prior to the SNB announcement and they naturally reduced whilst clients took stock of the situation and assessed market conditions. Fortunately, we’ve experienced an uptick in client activity since then as well as an influx of inquiries about our ClearVision technology.

What lessons can be learned from the SNB event and do you think it will have long-term effects on the industry? 

I think the landscape will shift in respect of banks’ margins and credit lines, and this will really impact the PoP space. Margins will have to be closer aligned and capital requirements met. I also think retail brokers will become more risk averse. I believe that the SNB event has actually created a huge opportunity for us. It’s clear to everyone in the industry that risk management tools and the right liquidity provision are imperative. I envisage particularly high demand for our risk management solutions and we are already seeing increased interest in these products. 

CFH Clearing – helping brokers and banks to improve their profitability and efficiency

ClearVision has attracted significant interest since it launched. What are the components of ClearVision and what functions do they each have?

ClearVision has transformed the market as it provides a complete trading and technology solution. It gives clients the ability to manage liquidity, risk, collateral and reporting all within one system. It comprises of five key areas and has been designed as a modular system, enabling users to select the whole package or individual tools most suited to their needs. 

ClearVision consists of:

•  One Risk Dashboard – enabling brokers and banks to monitor real-time client and hedge exposure from a single interface

•  Liquidity Control – allowing users to manage and aggregate their own unique liquidity streams

•  Block Trading – a trade allocation tool for funds and money managers 

•  Web-based Back Office – a cloud-based back office solution, enabling brokers and banks to assemble and effectively manage clients right down to the most granular level

•  Back Office API – enabling clients with their own back office system to integrate with our systems, eliminating the need to add additional layers of technology.

At the end of 2014, CFH Clearing was voted Best Liquidity Provider at the Forex Magnates awards. Why do think the company won this recognition?

Being voted Best Liquidity Provider by over 500 of the top executives in the industry from across the globe was a real testament to our success. I think we stand out for our liquidity offering largely because of our customisable feeds and focus on always giving customers the best possible pricing. We create liquidity from Tier 1 providers, with competitive spreads, minimum slippage during volatile markets and low rejection rates. It’s a very compelling offering and our clients really benefit from the strong relationships we have built with our liquidity partners. 

Leading FX Prime Brokers need to have a strong focus on technology. How important is it for CFH Clearing to own its technology?

We believe this is critical. It gives us full control. We can adapt it to cater for specific client requirements and can evolve it quickly to ensure we remain at the forefront of the market. CFH Clearing has invested heavily in both our hardware and connectivity solutions. We believe that owning our own technology gives us a key competitive edge.

CFH Clearing – helping brokers and banks to improve their profitability and efficiency

How are you helping sell-side firms to meet the new requirements set out by Dodd-Frank and EMIR Regulation?

Financial institutions are seeing the benefits that a Prime Broker can bring in terms of reporting tools to meet their legal and compliance obligations. CFH Clearing offers reporting for free to brokers who use our technology. 

What do you consider to be the main secrets of your success and the reasons many brokers are choosing to work with CFH Clearing?

I think we’ve always been ahead of the curve. We have an excellent team and really understand the market we are in, no matter which country we are operating in. We spend a lot of time meeting clients and listening to them about their individual needs. It is because of this insight that we can help them to operate more effectively. We have all the capabilities in-house to fulfil their requirements.Clients across the globe welcome the fact that we have native speakers as key contacts - people who not only speak their language but also who understand their culture and business mentality. We are renowned in the industry for our optimal service levels and I believe this is another key reason why we are continuing to experience fast growth. 

What are you plans for future growth?

I am excited about the year ahead. I am confident that we will continue to expand our client portfolio, thanks to the high level of interest in our ClearVision products. We will also reap the benefits of our new connectivity infrastructure, in LD4 and in China as well as leveraging opportunities from more companies in the CFH Group and further consolidation with target brokers under the CFH Clearing umbrella. We are open for business!

How can financial institutions learn more about CFH Clearing? 

Visit our website at www.cfhclearing.com, send an email to info@cfhclearing.com or call +44(0)203 455 8751. We would really welcome the opportunity to talk further to any of your readers.

CFH Clearing – helping brokers and banks to improve their profitability and efficiency