Neil Browning
Neil Browning

Saxo Markets - Talking with an FX pacesetter

Saxo Bank Group was established in 1992 and was one of the first financial institutions to develop an online trading platform that provided ordinary investors with the same tools and market access as professional traders, large institutions and fund managers. The firm is a leader in electronic trading services and its goal has always been to democratize investment and trading by providing access to global financial markets and cutting-edge technologies. e-Forex talks with Neil Browning Executive Director, Global Head of FX Sales at the firm to learn more about its Retail and Institutional offerings and plans for the future.

First Published: e-Forex Magazine 77 / e-Forex Interview / September, 2017

Neil, e-Forex started working with Saxo 15 years ago. Please tell us a little about the international network that the company has now built up since those early days and where your clients are currently located around the world.

Even back in 2002 when I joined Saxo, Saxo FX Sales covered the globe. Since the early days of Saxo, we were international and this is thanks to our foresight and investment in technology. From the outset, Saxo recognized the need to have a multi-lingual platform and a multi-lingual workforce. As a Brit  speaking a couple of foreign languages it was very easy to fit into the multi-cultural environment that Saxo established. It has always been a priority to have many nationalities represented at our headquarters in order to serve our international client base.  Today we are represented in 16 countries across key financial centres serving clients in 170 countries.

Our footprint has evolved given our White Label offering, as other financial service providers are breaking down their value chain and outsourcing all or some of their technology requirements to providers such as Saxo to deliver best of breed solutions to their own client bases. 

What range and types of financial instruments can now be traded with Saxo?

Saxo provides trading in more than 35,000 instruments in a single, collateral efficient, margin account with real-time position monitoring and 24/5,5 trading services. Our clients can trade FX Spot and Forwards, FX Options, Equities, ETFs/ETCs, CFDs, Futures and Options as well as Bonds. We also offer investment in managed portfolios.  In response to growing interest in Bitcoin among our clients, we have added two new Exchange Traded Notes (ETNs) to our offering. Our clients can now get exposure to Bitcoin through these ETNs designed to track the movement of Bitcoin against the US Dollar (BTC/USD).

All your products and instruments are traded on Saxo’s trading platforms. Please can you tell us a little about these and the various versions that are available.

Our next generation platform services cover our trading platforms: SaxoTraderGO and SaxoTrader, as well as APIs, and investment management services. SaxoTraderGO provides fast and mobile trading and our clients can manage their portfolios easily on any device from a single account. 

SaxoTrader is a professional platform combining speed of execution with advanced platform features.  Our API solutions provide tailored multi-asset liquidity via single API and our OpenAPI provides API-enabled access to our capital markets infrastructure as well as pre-trade risk controls.

Our investment management services, SaxoSelect provides digital and fully automated portfolio management for investors and Saxo Portfolio Manager is a fully integrated portfolio management and reporting solution for wealth managers.

Saxo provides trading in more than 35,000 instruments
Saxo provides trading in more than 35,000 instruments

What do your own day to day responsibilities as Global Head of FX Sales at the company usually involve and focus around?

Our focus is to ensure that our FX product, pricing and platform meets our clients’ needs and at the same time remains compliant within a continuously evolving regulatory environment. What is core to our success is a strong collaboration both internally across departments in the value chain and externally with our clients.  

We perform continuous reviews across all geographies and on all client segments from Saxo’s retail franchise and institutional clients, through to our business partners. 

Understanding client needs and solving incrementally for their largest pain points are paramount to our continued growth. Channelling this valuable feedback through the value chain is conducted with regular huddles at our Digital War Room.

Who are the other key individuals in the FX team and what roles do they play within Saxo Bank Group?

We have a very solid FX team, all committed to clients as well as to each other.  I have regular contact with all commercial leaders and especially with Kurt vom Scheidt (Global Head of Foreign Exchange), who is responsible for the overall strategy of the business.  He is based in our Singapore office, emphasising how important the Asian region is to our business, and between us this geographic split also allows us to maximize our around-the-clock productivity and minimize client waiting times when issues do arise that require urgent attention.

Clients have been attracted to Saxo by its secure environment and overall stability, as well as its capital ratios
Clients have been attracted to Saxo by its secure environment and overall stability, as well as its capital ratios

What’s your opinion about how the retail FX space has changed over the past few years and what unique challenges is the industry facing given that the currency markets are gearing up for the arrival of new regulations and FX providers are having to deal with growing threats ranging from cyber-attacks to unexpected political risks?

We have seen over the last several years that technology has lowered the barrier to entry into the FX market whilst coincidentally enabling more dimensions on which firms can compete, which is a healthy market evolution.  An example of Saxo’s ability to adapt is the way in which we have changed our execution model to become an order-driven environment.

This provides clients with the opportunity to trade using orders rather than quote driven prices, which can be subject to last look. We believe that this, without question, is a more transparent approach and it allows clients to benefit from price improvements on every single trade. This execution method also provides clients with more control on their execution quality allowing them to express their own value preference between price and fill-ratio.  Their choice is supported by our transparent publication of order execution statistics on our website.  We are fully transparent in terms of our historical spreads and provide a full history for multiple trade sizes over different time periods, not just top of book averages. In summary, we offer total transparency on both pricing and execution.

By far, the biggest overall challenge in the FX market has been the change in market structure which has resulted in a reduction in the depth of liquidity, as well as greater liquidity concentration.  As a result of these trends, going forward we expect to see more mini flash crashes when liquidity disappears, as well as more frequent temporary liquidity droughts.  Optimizing liquidity and execution quality needs to be at the forefront of the minds of all market participants as the market continues to evolve.

Understanding client needs and solving incrementally for their largest pain points are paramount to our continued growth
Understanding client needs and solving incrementally for their largest pain points are paramount to our continued growth

How has Saxo positioned itself within this new environment to ensure that you remain competitive whilst at the same time keeping your clients protected and giving them the best possible trading opportunities?

First and foremost, we are a multi-asset provider with the expertise to adapt to the evolving regulatory environment quicker and with greater agility, perhaps than most other providers that are only offering a single FX spot product.

One of our key strengths is that we are a truly multi-asset financial markets facilitator with one IT stack across all asset classes, offering capital efficiency through cross-product margining in a single client account. The smaller providers are less equipped to adapt to the ever changing regulatory and industry environment. We spend a lot of time harmonising efforts across asset classes and we will continue to do so as regulatory and industry reform continues within the FX industry.

Saxo was one of the first institutions globally to formally commit to the FX Global Code and we are very focused on adhering to those principles to offer the highest quality service to our clients on a win-win basis, with minimal conflict of interest.

We have a very solid FX team, all committed to clients as well as to each other. From left to right: Lucian Lauerman, Kurt vom Scheidt, Nicolas Khouri, Neil Browning, Christian Lonborg Thomsen and Peter Plester

We have a very solid FX team, all committed to clients as well as to each other.

From left to right: Lucian Lauerman, Kurt vom Scheidt, Nicolas Khouri, Neil Browning, Christian Lonborg Thomsen and Peter Plester

Have you noticed any recent client demand for Institutional or Retail products and trading services that is unusually strong or which you haven’t seen before?

In the last year or so, we have certainly seen more customers leaving our peers to become Saxo clients.  These clients have been attracted to Saxo by our secure environment and overall stability, as well as our capital ratios. We are extremely well positioned as a strong and stable financial institution. We are a multi-asset provider, servicing both FX retail clients and a subset of institutional clients.

We are also increasingly seeing clients coming to us to use FX Options as a hedging tool. 

Our Prime of Prime business is also seeing steady growth as clients have come to us attracted by our balance sheet as well as value added liquidity optimization services that can be tailored to individual client.

Increasingly e-Forex is reporting on the latest Blockchain and digital currency developments and we have noticed some brokers are starting to offer cryptocurrency trading. What’s your view on the future development and prospects of cryptocurrencies and what approach is Saxo taking to that market?

The recent hype surrounding crypto currencies is mainly due to the growth in the valuation of Bitcoin, as well as the launch of new crypto currencies by Ethereum and Ripple.  

As far as Saxo and crypto currencies is concerned, we are currently in the process of building our insights into the crypto market and understanding our clients’ needs in this area.  Currently, we are hearing that clients are keen to have exposure to crypto-assets as part of their portfolio, just as with other asset classes. However, many clients are telling us that they will only proceed with this strategy once crypto currencies are offered by regulated banks and as crypto currencies are not yet mainstream this is not possible. 

Trading Bitcoin and other crypto currencies will be our first priority, although to begin with trading will likely be limited. However, it is anticipated that our offering will enable clients to achieve their main goal of exposure to cryptos by trading the ETN’s via Saxo or by holding them in their ‘wallet’ and therefore enabling them to diversify their portfolio of assets.

One of our key strengths is that we are a truly multi-asset financial markets facilitator with one IT stack across all asset classes
One of our key strengths is that we are a truly multi-asset financial markets facilitator with one IT stack across all asset classes

Saxo Markets has been actively pushing its Open Banking initiative which allows your White Labels to differentiate themselves from each other. Please tell us more about this ecosystem concept and what it aims to achieve.

Saxo’s Open Banking solution is a ‘Business as a Service’ (BaaS) in the Cloud, delivered via our OpenAPI enabling our partners to connect their users to the global capital markets while picking and choosing the tools and the service they need to integrate to their existing offering. 

What is unique and superior about Saxo’s OpenAPI in comparison to other industry alternatives is that while others focus on developing API solutions on top of a firm’s existing monolithic systems and anticipate transformation, Saxo adopts the BaaS approach and uses its OpenAPI to deploy solutions on a transformative scale. 

Any financial services firm can now log on to the Saxo OpenAPI developers portal and integrate a set of transactional and collaborative tools in a way which is fully integrated to their existing interfaces and enterprise systems. This enables the financial services firm to focus both its time and capital on the most important issue which is selling and servicing clients with their own authentic user experience.

In Switzerland, where I next to my role as Global Head of FX Sales also have headed up Sales in the last 12 months, our OpenAPI has enabled several wealth managers to launch robo-advisory services to digitally-savvy customers. 

Prime of prime has moved from a niche product to a mainstream offering because of regulation. However Saxo has a different approach in this space. Please tell us about that and why pre-trade risk controls are an important part of your service and a top priority for the firm.

Over the past 12 months we have continued to build momentum, becoming the prime broker of choice for a growing number of clients.  One key growth driver has been Saxo’s pioneering use of pre-trade risk controls at a time when capital and liquidity constraints have meant many large prime brokers are unable to service smaller and medium sized firms.  These controls have made Saxo the provider of choice for clients who are struggling for comprehensive market access and services.  

From a credit risk perspective, the FX prime brokerage market was traditionally controlled on a post-trade rather than a pre-trade basis.  Saxo examined the market and on the back of this research decided to create and implement a different model, looking at risk on a pre-trade basis.  The key differentiator was the introduction of pre-trade credit risk controls, eliminating the inefficiencies rooted in the over-allocation of credit and facilitating maximum access to all relevant liquidity nodes at all times.

“We have over 20 years of expertise combining high quality credit provision, cutting edge-technology and a level of service and security which FX prime of prime clients expect but which is not offered by the large majority of prime of prime providers.”
“We have over 20 years of expertise combining high quality credit provision, cutting edge-technology and a level of service and security which FX prime of prime clients expect but which is not offered by the large majority of prime of prime providers.”

Your Prime offering is now servicing 120 clients and the business is growing fast. What features and functionality have you added over the past year to keep the momentum going?

Our prime of prime service continues to win new clients.  Both monthly volumes and the number of active clients grew by 50% year on year in 2016.  This strong growth in client numbers - around 120 currently - and volumes has continued in 2017, with year on year growth upwards of 25% again in 2017.

Much of this success can be attributed to the range of services that we offer as well as our unique approach. We separate our market making and credit intermediation business so as not to act as a direct liquidity provider to our prime clients.  This approach means that we are unconflicted in our liquidity optimization work.  

We also work in partnership with our clients to deliver market access, helping them to achieve best execution, while leveraging our highly scalable technology to monitor fill rates and response times from our liquidity providers and provide analysis tools and resources that have supported our hedging optimisation for many years.  

Our pre-trade risk controls have been extremely welcomed by clients, in recognition of the importance of mitigating the constraints resulting from over-allocation of credit lines across venues so common in the world of post-trade credit checks.  

We have also recently launched access to SaxoSelect which enables the Group’s clients to invest in pre-selected strategies directly from their trading platform. In addition, we have a  a cross-collateralisation facility between prime infrastructure sites in New York, London and Tokyo. This allows clients to optimise their collateral by automatically synchronising balances and exposures across these three locations in real-time, while maintaining a pre-trade credit check per site. 

Our clients are also increasingly using our OpenAPI offering to expand the services they offer to their own clients. Through our proprietary OpenAPIs we can offer numerous connectivity and integration options.

Why should clients make Saxo their first choice for prime of prime services and what in your opinion sets the firm apart from the competition?

The success we are achieving in our prime of prime offering is down to the fact that Saxo is a truly multi-asset technology-driven prime broker, providing services and a unique approach that traditional prime of prime providers do not.  We have over 20 years of expertise combining high quality credit provision, cutting edge-technology and a level of service and security which FX prime of prime clients expect but which is not offered by the large majority of prime of prime providers.

What range of other Institutional FX and Partnership services does Saxo offer and do you expect White Labelling to remain a core offering and as important to the firm as it has always been?

As an enabler of trading and investment through technology, Saxo has continued to acquire new white label partners (WLP) globally, empowering them to improve the investment and trading experience of their end-clients.  

The past year has seen significant growth at Saxo Markets, the institutional division of Saxo Bank Group, adding seven new partners in key strategic regions including Asia, Middle East, Canada and Europe. There are now over 100 WLPs, including 12 banks or brokers with cross-border activities, using Saxo technology and contributing 30% of the Group’s overall trading volume. Saxo has increasingly seen new partners embracing the investor segment by launching solutions leveraging Saxo’s automated investment technology, SaxoSelect and Saxo’s OpenAPI as well as new products such as the fully digitised bonds value chain.

Saxo has been one of the leading pacesetters in FX trading for many years. Sometimes however, as the saying goes, “the pioneers take the arrows and the settlers take the land”. Looking ahead, how can you guard against that threat and what steps will you be taking to maintain your position as one of the industry’s top providers?

Relentless focus on adding value to clients as well as on innovation in a collaborative form with a cohesive team are the simple keys to the continued success of any business.

We have one IT system, and we are able to build on that to ensure that we have got an FX environment that adheres to but also helps drive market reform. When it comes to managing liquidity, it’s what we have been doing for the last 25 years. We have great, intensely data-driven relationships with top liquidity providers, with bank and non-bank sourcing, as well as the ability to access a large range of primary and secondary ECNs. The technology and analytics that underpin this access are key to adapting to dynamic market conditions and to delivering great service and execution quality to each of our Direct and Prime client bases.

I think the order execution model sets us apart from our peers. It is our niche -- the effective fill and the quality of the fill, and the underlying monitoring and the value of our execution statistics, as well as our commitment to the Code of Conduct. I believe this is what really sets us apart.