Trust, Technology, Liquidity, Credit and Clearing power – what is happening to the building blocks of FX Prime Brokerage

After years of struggling to adjust to the upheaval suffered during the global financial crisis, FX prime brokers are now facing another seismic shift after the SNB’s surprise move in January. But, for the best-of-breed players out there, this debacle has proved an opportunity. Caroline Henshaw investigates.

The role of FXPBs has evolved rapidly in recent years thanks to the growth of global FX markets, the increasing diversity of players trading in them and regulatory pressures. “FX volumes have more than doubled in the last 10 years where FX has increasingly been seen as a new, separate asset class, providing alpha that is uncorrelated with other asset classes,” says Wayne Roworth, Co-Head of e-FX at Sucden Financial. “Furthermore, there has been an exponential increase in the number of FX trading platforms and electronic communication networks, which allow buy-side firms to preserve their liquidity provider relationships whilst benefitting from price aggregation.” FXPBs play an important role in international currency markets, providing both the essential clearing services and credit that financial institutions and exchanges from around the world need to trade with each other. They act as an intermediary between funds and two types of counterparties: institutional investors with...continued

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