Farooq, what major challenges has MAREX Financial faced in achieving such rapid growth and success since its creation in January 2006?
MAREX was new to the market and, as such, we needed to differentiate ourselves from our competitors. The first thing we had to do was to make sure that we had the right staff. The Senior members of the team had worked together previously and we understood that in order to take a new company into an already competitive market, we had to make sure that we were offering a level of service that had not previously been offered.
We did not want to be seen by our customers or by the market as just another 24 hour trading desk, or just another vendor offering electronic access. In order to support our customers properly, we had to ensure we were seen as a hybrid and used as such.
One of the many advantages we had being new to the market was that we were able to evaluate our own personal experiences and see what our competitors had done well and not so well.
We knew that our customers would demand an online platform so we had to choose whether to develop one ourselves, white label a bank’s platform, or tie ourselves to a multi-bank platform provider all of which had been done by our competitors. In the end, our desire to go to market as soon as possible meant that developing our own platform was not an option. Our customers are understandably demanding in nature and for us a WL of a single bank platform would not have been acceptable. Having all previously been involved in offering one multi-bank platform and understanding the restrictions inherent of a single offering, we decided that a combination of multi-bank platforms was the way for us to go. We opted to build relationships with all the best multi-bank platform vendors. Our customers now have access to 360T, Currenex, EBS Prime, FXall (QuickFill, QuickTrade, Accelor platforms) Hotspot and Lava Trading.
We were building a business from the ground up, which started with infrastructure such as our back-office systems. We wanted to make sure that we had a system that was able to support all of our services, whether a customer trades via the telephone, Reuters Dealing, Reuters/Bloomberg Messenger or any of our various online offerings. The customers trades are booked quickly and accurately via STP into a fully scaleable back-office system, all of which can be accessed by the customer online.
Can you tell us a little about the nature of the client base you support?
Our customers are as diverse as the countries they come from. We have customers from the largest corporates, to hedge funds, to banks, to Financial Institutions to HNWI. Professional customers requiring a professional service.
MAREX began by offering execution and clearing services in currency futures, metals, energy, agriculture, interest rates, equity indices and stock options. Foreign exchange was then subsequently introduced. How important has FX become to the business and how wide is the scope of your FX services?
FX has become an integral part of MAREX’s business. FX, by its very nature, often dictates that other asset classes require some form of FX cover as a secondary necessity. This provides many opportunities for cross asset selling within MAREX. A MAREX customer who trades asset classes other than FX has the ability to access the FX market all under the same roof. Our traders have a wealth of market experience. This experience and professionalism has proved itself time and time again in all market conditions, ensuring our customers receive a professional service at all times. Our FX coverage includes all tradable currencies for spot, forwards, EFP’s, options and other structured products.
MAREX FX offers clients a range of tailored e-FX trading solutions. Why is avoiding a "one size fits all" situation so important to the company and how do you go about creating a tailored approach to meet the needs of clients?
When you are ‘married’ to a platform or a platform vendor, you have to enthuse the ‘one size fit’s all solution.’ MAREX’s solution is to give our customers a choice of online venues. We have all worked in institutions who were ‘married’ to one platform or another. Client meetings invariably end up defending your platform against the competitions. Our approach is different; we understand that each client may have a slightly different trading strategy, style or general requirement as we are agnostic about which platform a clients chooses (360T, Currenex, EBS Prime, FXall (QuickFill, QuickTrade, Accelor platforms) Hotspot and Lava Trading). We listen to their requirements and recommend one or a combination of platforms for them. It is also our belief that our role as a broker-dealer defines that we should source the best price possible for our customers. By allowing the customer to access the market via as many portals and liquidity pools as possible, we believe we are better placed than our competitors to do this.
Another important idea that MAREX promotes is the so called “one-stop” concept. What does that actually mean and what benefits does it bring clients?
Using their MAREX account, our customers can trade LME base metals, Steel, Precious metals, Agricultural futures, Financial Futures and Foreign Exchange. A client’s account is cross margined giving them better utilisation of their funds. This sounds somewhat simplistic but it is a requirement that our customers look for and one that is often under valued.
We have recently been reporting on the growing interest in automated and algorithmic trading for FX and MAREX of course already offers a variety of API-based trading solutions. With that in mind, do you still hold with the view you expressed a few years ago that there will always be a need for manned trading desks?
Trading desks have been written off many times in history. It is my belief that there will always be room for trading desks. We have seen a growing move to online trading borne out by the explosion in automated trading models and I expect this to continue. But there will never be 100% coverage online. There are many times dealing desks are able to provide better prices even than multi bank platforms, especially in volatile markets. It is also my belief that large orders are better executed with a trading desk rather than online, the same can be said of stop orders. Most electronic systems are still too binary in this respect - as soon as the order hits touch the order is executed. Our experienced traders have an understanding of the general depth and will try to keep a customer in if they feel it is just a false break. This has also been evidenced in the last few months in recent market conditions where liquidity has been squeezed across many e-commerce channels, larger orders that this time last year were more easily executable over a platform now require the expertise of a manned trading desk to source that liquidity and ‘finesse’ the order. At MAREX, we actively encourage our customers to speak to the trading desk for news, views, ideas or just to moan about what happened to their football team over the weekend!
In the short term, where do you expect to be focusing your efforts to extend the reach and improve the features and functionality of your current e-FX products and services?
We have over the last few months been working with a specialist developer to create a platform primarily aimed at the White Label market. Presently most ‘retail’ platforms are sold to and aimed at the end user. As E-FX solution specialists, MAREX has been asked by many of our banking and institutional customers to provide a solution for them to cover this market. Again we wanted to break away from the norm in this area by offering a platform which whilst attractive to the end user, is aimed at banks and financial institutions with their own retail client base. To this end, we are offering a WL solution that gives control of the WL’s customer back to them. Our WL partners will be able to maintain their clients confidentiality even from MAREX. Essentially, we are giving the WL partner autonomy, but more importantly independent control of the platform from the client onboarding process, including the management of spreads, right through to the cosmetic look and feel of the GUI. Breaking into this market was never going to be easy and in order to set ourselves apart it was necessary to provide something different. MAREX’s core guiding principles are client focus, teamwork and integrity, so it was a natural and logical step to hand control of the platform and move the focus back to the client.
At the other end of the spectrum, it is imperative that our own liquidity can be sourced by our institutional customers. To this end, we offer live FX spot and options pricing via Bloomberg.
Do you foresee the popularity of FX as an asset class continuing to grow and how might that shape the type of new clients you would be seeking to attract and the evolution of your FX products and services?
Electronic trading has made FX what it is today. It has always been the largest market. However, the accessibility, speed of delivery of information, transparency of prices, has opened FX up to a wider audience from the ‘Retail’ investor, to the most sophisticated Hedge fund. As the complexity of the technology has increased, so has the sophistication of all clients at either end of the customer spectrum. Without a doubt, FX volumes will continue to grow with a larger proportion of this volume executed electronically.
MAREX has also seen tremendous growth in the numbers of customers trading FX options. We have seen many more hedge funds and corporates getting involved with FX options. As “retail” customers mature I also expect much more interest from this quarter.
In terms of how MAREX takes advantage of these new market opportunities, I think the core MAREX ideals will become increasingly important: Listening and understanding our clients, offering transparency, offering ability to offer C2C trading, providing superior order management capabilities, ensuring confidentiality and anonymity of customers, offering structured products and importantly flexible approach to our client needs.
Members of the MAREX FX team come from a wide variety of e-FX backgrounds, which I see as pivotal to the continual support of clients. We already have a wide and varied portfolio of clients with constantly changing requirements, and I am confident that we will continue to meet their ever changing needs.
Although the FX market is very large, it's becoming quite crowded with FX trading venues and platforms. Ultimately, is there room for everyone or will we eventually see some form of consolidation amongst providers and if so, what will it take to stay in the game?
Having a choice of platforms is good for clients, but some consolidation is inevitable. Although all of the products seem to have a niche, I see that some of the multi-bank platforms may well end up owned and operated as the technology for a single bank system. I think we will see a continuation of what we have seen in the United States this year with regulators making sure that low end retail platform brokers/vendors are taken out of the market in order to give clients better protection. In the retail space, we have started to see a flight to quality with large banks aligning themselves with small retail vendors. However, with the rush to enter the retail market, there is some circumspection as to some of the banks choice of partners.
In terms of which ones survive, I think in the highly competitive world of algorithmic trading, speed is king. Only the fastest will survive. A constant investment in technology, both in terms of hardware, software and architecture to ensure security, flexibility and scalability will be required to send out the stream of prices, as well as receive the orders as speed and latency becomes measured in single milliseconds and eventually nanoseconds.
Historically, banks would offer their liquidity on any platform where their clients requested it. However, they are increasingly selective about where they now place that liquidity Going forward I anticipate the ratio of trades done on a client-to-client basis growing sharply.
Other areas of growth will be in the arena of options and other structured products.
For MAREX not being married to one platform, being able to offer what ever is ‘best of breed’ at the time and having the flexibility to change as customers demand will ensure we are always in ‘the game’.
MAREX offers coverage of Commodities, Financial Futures and Options and FX Markets, from offices in London, Geneva and Gibraltar. What plans do you have to expand your international presence in the future?
MAREX is a fresh face to the market and it is not our intention to rush in to any new markets. It is our intention in the next 24-36 months to have a presence in the United States, Asia, GCC and South America.