“It’s our 42nd year in business and Sucden Financial continues to go from strength to strength,”
he explains. “As one of the largest Prime of Prime (PoP) providers, we believe that our heritage and the strength of our offering have helped us to thrive, despite recent challenging conditions in the market. There is no doubt that the Prime of Prime world is in the midst of change since the events of 15th January 2015. For us, it has presented an opportunity. It is becoming increasingly apparent that the larger, better capitalised and diversified Prime of Prime brokers are gaining increasing market share, and as such, we are feeling optimistic about our future growth.”
Wayne highlights five key changes post SNB events and explains why Sucden Financial is a key partner for medium and large brokers.
1. Collateral / Balance Sheet
It is widely understood that since the SNB event there has been an increase in the minimum balance sheet and collateral requirements from tier-one prime brokers. Sucden Financial is fortunate to be in a strong financial position that comfortably exceeds these new conditions. Potential clients cite this as a key requirement when choosing a Prime of Prime partner and more than ever we are being asked to demonstrate our financial position and provide our financial statements.
2. Counterparty Profile
We understand that some tier one prime brokers are reviewing their exposure to the entire retail FX market. Sucden Financial is a highly diversified company, meaning the banks do not generally categorise us as an FX broker. We are a multi-asset brokerage with a significant presence in futures, particularly metals and soft commodities. We believe there is still significant risk for those firms solely focused on FX, many of which could be at risk of losing their PB relationship, so it is important to have a backup in place. At Sucden Financial we have two PBs. Uniquely, we also have direct relationships with nine banks, further reducing our dependency on any one provider.
Another consequence of ‘Black Thursday’ is that FX liquidity provision is under scrutiny. Although underway for some time now, there’s been a redoubling of efforts to balance the volume versus value equation; bank liquidity providers are carefully considering who they stream liquidity to and how it is consumed. Since Sucden Financial operates in a clean and transparent way, our liquidity providers are happy to compete for our business, enabling us to offer our clients some of the tightest pricing available in the market. Combined with a dedicated liquidity management focus, the outcome for our clients is significantly improved spreads, which equate back to early 2014 levels when volatility was lower.
4. PB Costs
As PBs raise both their fees and margin requirements, we believe these additional costs will inevitably filter down to the clients of Prime of Prime brokers. Fortunately, Sucden Financial is in a fairly unique position as a PoP as we have so many direct relationships, enabling us to keep our cost base low because we do not need to give up every trade to our PB.
In the aftermath of the SNB move almost all FX market participants have asked the same question, “What could we have done differently?”
There has been a renewed focus on risk management systems that reside on the trading infrastructure. Low latency pre-trade checks, combined with intelligent instrument concentration rules are the main subject of conversation. As you would imagine there is a special focus on currency pairs that are not free floating.
Sucden Financial has been in business for over 40 years, with dedicated departments continually monitoring and managing market and counterparty risk. The firm has always taken a prudent approach to risk, which has led to solid, consistent growth over the decades.
With a history of over 40 years in the financial markets, Sucden Financial provides clients with access to 100% STP FX and bullion liquidity. CFDs and futures can also be streamed via its API and clients benefit from tailor-made solutions utilising the latest cutting-edge technology. Sucden Financial Limited is authorised and regulated by the Financial Conduct Authority. For further information, visit: www.sucdenfinancial.com