Nicola Tavendale
Nicola Tavendale

Partners of choice - Exceeding customer expectations in FX White Labelling

The rise of new technologies, multiasset class trading and growing sophistication of the markets has led to fundamental changes to the traditional FX white label model. But how has it evolved to meet the needs of today’s markets and what does the future hold for this lucrative sector? Nicola Tavendale writes.

The legacy of the white label model goes back well over 15 years and it would be fair to say that the prevailing mentality from all involved was one of a land grab, says David De Juan Sardina (De Juan), Head of Institutional Sales at CMC Markets. Yet while the initial focus may have been on signing up as many new partners as possible, this is unlikely to have always been in the best interests of the client. The industry has come a long way since then, however, and now there is much greater recognition of the differences between types of client and their individual needs. “Most counterparties are now far more fl exible when it comes to the white label offering, as well as providing application programming interface (API) and grey label solutions that ultimately put the client’s needs fi rst,” De Juan adds.

Initially these counterparties were mostly newcomers to the market, or banks and brokers who wanted to generate new revenue streams for their institutions but without necessarily investing heavily in the necessary IT infrastructure. But today’s clients are clearly even more knowledgeable than in those early years, says Muamar Behnam, head of white label and Institutional e-FX sales at Swissquote Bank. As a result, white label service providers such as Swissquote Bank have needed to adapt to meet the evolving demands of their counterparties. “The profile of partners has also changed,” adds Behnam. “In the past, a white label user was basically a partner ‘locked in’ for a long period of time. Changing their partner was a complicated process.”


But the range of options now available in this space means it is much easier to switch from one white label provider to another, he adds. For example, Swissquote Bank has responded to this demand by offering extra features on all its platforms, local language support and very competitive conditions “to keep our partners happy”, explains Behnam. In all, clients are now looking for white labelling offerings to do more than just protect their business from fast technological change and help increase trading volumes. According to Henrik Alsøe, Head of White Label and IB Business at Saxo Markets, such services are now also viewed as an opportunity to customise their client experience and create new revenue streams. He adds: “OpenAPI technology is revolutionising the way that trading technology is white labelled, as it is fundamental to client customisation. This is why we chose to build our trading platform, SaxoTraderGO, using OpenAPI technology.”

Not only does SaxoTraderGO offer functionality across the trade life cycle - from pre-trade, execution and post-trade services in multiple asset classes - it also allows Saxo’s clients to integrate white label client (WLC) solutions directly into their own applications and systems, Alsøe explains. In fact, while white labelling was once a simple plug and play solution, increasingly partners are asking for bespoke alterations to the standard model, often with increasingly complex reporting and integration requirements. Mark Chesterman, Global Business Development Offi cer at IG, adds that it is now unusual for a partner to only utilise a single broker’s tools and platforms. “Increasingly there is a requirement to incorporate other third party tools as part of the white label integration,” he says.

The first thing a future white label client should check is how financially solid the partner he wants to work with actually is
The first thing a future white label client should check is how financially solid the partner he wants to work with actually is


This growing demand for customisable, bespoke solutions has also given rise to a divergence between full or partial white label services. “Technology today is designed and developed with these new broker needs and expectations in mind,” says Luis Sanchez, CEO at BMFN. “As a white label provider, we must pay close attention to whether a broker wants to have either a full or partial white label solution.” BMFN achieves by offering a ‘tailor-made’ solution with an open infrastructure, which allows brokers to readily adapt and modify their white label model at any time. “The white label solutions and technology must now be flexible enough to be adapted as and when necessary,” explains Sanchez.

“This ensures the broker can remain competitive with their clients’ requirements for years to come and so can justify its investment.”

It is certainly easy to overlook the fact that deploying a white label solution is a big commitment from the perspective of both the broker and the client, agrees De Juan. It constitutes a significant investment and, although the provider should offer marketing and integration support to the client as necessary, the expectation is that the deal will drive significant flows. “But in practice, the white label approach can make it difficult to integrate with some legacy or third-party technology that the client wants to retain,” warns De Juan. Critically, however, certain brokers - such as CMC Markets - have engineered platforms that can funnel trades back to a common liquidity pool, regardless of the frontend used by counterparties. “You get the same pricing and execution regardless of the interface used,” De Juan adds.

David De Juan Sardina

David De Juan Sardina

“We know that clients appreciate a high degree of trust in the relationship, transparency of pricing and a high quality of service when they look for a white labelled solution,”


In addition, Behnam argues that it is also good for the market to have a variety of white label providers ie leading brokers as well as specialist technology providers. But ultimately this level of choice means that providers such as Swissquote Bank must position themselves differently and be able to offer what these technology providers cannot. “I still believe that banks and brokers have the edge in terms of liquidity provision,” Behnam adds. “We can offer very competitive conditions to trade, thanks to our relationships with liquidity providers, alongside being able to offer credit lines to our institutional partners.” Alsøe, however, argues that white label partners (WLP) want an outsourced solution from a firm that is not only a leading broker with market expertise, but also a technology specialist and an experienced business process outsourcing (BPO) provider. “Saxo offers all of this and is unique in this respect,” he adds. “We have more than 20 years of technology innovation and experience in trading infrastructure, and we are a pioneer in FX retail trading. Furthermore, we have made a commitment to ongoing investment in our trading platform, SaxoTraderGO, which means that we are continually enhancing our offering.”

Yet, while some white label partners may attempt to bridge any gaps in their technology provision by outsourcing certain developments to specialist IT providers, Sanchez warns this may not always be the best option. “If you outsource your new tool or feature and then there is a problem with its functionality, who will the white label broker blame?” he explains. “The outsourced thirdparty provider or the white label partner?” A better option may be for the broker to become familiar with the white label provider’s offering first and then evaluate if the required new tool is really necessary - and then speak to their provider first before outsourcing it. “The white label provider may then deal directly with the third-party IT company to develop and integrate that tool,” Sanchez adds. “It may also be more cost-effective, or even free.” But while large brokers can spend millions a year on their trading platforms, risk management systems and back offices, smaller brokerages need to differentiate themselves and not just try to compete by offering the same set of tools and services. “For larger banks with their own client base to whom they can cross-sell, and their large brands which they can leverage, this is less of an issue – their differentiation is the brand and customer loyalty,” says Chesterman. “For a smaller brokerage, it may make a lot more sense to source platform, back office, and liquidity from different specialist providers to customise their offering for their target market.”


Furthermore, Chesterman adds that while constant innovation is driving the current crop of popular platforms to greater heights of utility and experience, it is important to remember that one of the most popular platforms is still MT4 - which has in reality changed little over the past decade. Overall, the ease of use and integration of MT4 for both brokers and clients has meant that it is often the first choice for a white label partnership, he argues. “When you also consider the third-party services that have been built for MT4 by a host of providers, it is still a good way for a start-up brokerage to customise an experience for their potential clients,” Chesterman suggests. In the early days, a client could also utilise an out-of-the-box solution, as in many instances there was little that needed to be integrated. But as clients’ systems and requirements have become more complicated, many brokers have realised the advantages of being a better, more collaborative partner, says De Juan. “This goes back to the evolution we have seen in providing broker services over the last 15 years or so,” he adds. “In terms of pre-trade, there is a significant benefit in offering partners the flexibility to tailor charging structures in a way that meets the needs of their business.”

Spreads, margins and commissions can all be finetuned by the partner as a result, De Juan explains, which provides a meaningful commercial advantage irrespective of geographical dependency, reliance on a business unit or the end user. The ability to account for potentially complex internal structures can also add functionality. In terms of post-trade, a robust, functional reporting suite that can be specifically tailored to address the client’s business and regulatory needs is seen as a necessity. “This is valuable from both a financial standpoint, so end users can be aware of their positions through concise end of day reporting, and also from a regulatory perspective,” add De Juan. “Quite simply, if you don’t offer this flexibility then you’re immediately cutting off a swathe of potential business.”

Behnam agrees, adding that trading conditions, pre- and post-trade transparency, ensuring quality of execution and enabling access to Swissquote Bank’s trading desk are the main topics of interest for potential new partners. “We must convince them that our practices are in line with the best of the market,” he says. “As a bank, licensed in Switzerland, we impose even higher standards on ourselves than those from our regulator.”

Muamar Behnam

Muamar Behnam

“Meet the people, get a feeling about who they are, how they drive their business. It’s down to transparency and quality of the service you get.”


In fact, a brokerage looking for a full white label solution from one provider is placing a lot of trust in their hands. When they introduce their clients to a platform and service provider, they are ultimately entrusting that the provider will work just as hard to service their clients as the provider does their own, explains Chesterman. “The most successful fullsolution providers ensure that they work with the partner to build a long-term relationship based on trust and service,” he adds. Furthermore, even leading white label providers must continue to grow and expand their range of services to remain competitive. Saxo Markets, for example, continues to further enhance its existing white label offering through continued investment in its trading platform. “Our institutional clients can now build tailor-made apps on Saxo’s infrastructure and we expect this to be a large focus area for our clients going forward,” says Alsøe. In addition, he adds that Saxo will continue developing features to enable WLPs to customise their offering. The “FX Volume Price Plan” functionality, for example, can be utilised by WLPs to offer their endcustomers ECN-style pricing based on monthly trading volumes. “We also recently launched FX Tiered Margin, to enable WLPs to configure and control a tiered margin structure for all or some of their end-customers,” Alsøe adds.

Ultimately, each provider must be constantly developing new features and technology according to meet the changing needs of their clients. “And because open infrastructure is a must, the development department must keep constantly communicating with the white label partner/ IB’s in order to understand what’s next,” explains Sanchez. “They must do this to keep their partners satisfied and up to date.” Successfully differentiating themselves in terms of technology and applications is far from simple, however, and requires significant investment from the provider. “In addition, they must put in the hours to talk to their existing clients, partners and constantly do their research,” Sanchez says. “This is why providers have such large IT departments.” Furthermore, he adds that while one white label provider may be very good at providing a full white label solution they may not be so good at offering a partial solution. “Each white label provider specialises on its own public and demands, so this is why many brokers partner with more than one white label provider,” adds Sanchez. “They prefer to have at least two so they can cover all types of clients and business and markets.”

Henrik Alsøe

Henrik Alsøe

“OpenAPI technology is revolutionising the way that trading technology is white labelled, as it is fundamental to client customisation.”


Constant technological innovation is vital, agrees Chesterman. “If you’re not developing better usability, better functionality, and greater user experience for both the end client and the partner, then you’ll fall behind very quickly,” he says. Equally, he warns that the days of the FX-only service provider are coming to an end. “The market is turning multiasset class and those who don’t embrace this trend will quickly find themselves obsolete,” Chesterman adds. Increasing the number of assets on offer without impairing spreads is a critical way of expanding the offering, says De Juan. He adds: “Ensuring there’s an adequate liquidity provision here is critical, so again this is a case of the white label provider having to illustrate this to counterparties.” In the case of Swissquote Bank, for example, only 40% of its overall business is e-FX. In addition, it offers custodian/banking services for its partners, white label solutions for the equities market alongside more long-term investment. “That’s the way we see Swissquote growing and developing these partnerships that were FX-centric at the beginning,” explains Behnam. “Many of the brokers contacting us are seeking to diversify their revenue streams by adding these new channels.”

Additionally, he believes that the first thing a future white label client should check is how financially solid the partner he wants to work with actually is. “If the financials are public, check them,” Behnam warns. “And if they are not, ask for them.” Also, if they are dealing with a bank, the potential new white label partner should check the extra services they may be able to offer that a pure technology provider can’t, such as custody banking for client funds, credit lines etc. “Meet the people, get a feeling about who they are, how they drive their business,” Behnam says. “It’s down to transparency and quality of the service you get.” Alsøe agrees, adding that Saxo believes becoming a partner of choice should be simple. “WLPs should only work with providers who have a proven track record in trading technology and direct experience of the FX markets,” he explains. Saxo can offer all of these elements, Alsøe adds, combined with its commitment to continued investment.

Mark Chesterman

Mark Chesterman

“The most successful full-solution providers ensure that they work with the partner to build a long-term relationship based on trust and service,”


NEW PROSPECTS A further point to consider is that as white labelling has evolved over the past five to seven years, the barriers to entry are now much lower and it is easier for new brokers wishing to enter this space. But it’s still not likely to be the most profitable income for a broker, warns Sanchez. “Today’s white label providers have increased their internal departments and focus more on developing solutions for their clients,” adds Sanchez. “But if you look to the future, it can become a significant part of your income and also a strong marketing tool.” A full white label solution will not suit every client, so the new and existing broker must have a certain infrastructure, licensing, financial strength, operational and administrative mechanisms in place in order to operate properly. “In addition, clients today are much more sophisticated than before and they learn very fast,” says Sanchez. “They demand far more options and solutions, so the technology must keep up accordingly.” As a result, there will never be one single partner of choice, adds De Juan. “However, we know that clients appreciate a high degree of trust in the relationship, transparency of pricing and a high quality of service when they look for a white labelled solution,” he says. On top of this, they also want the broker to have a strong legacy and be fully committed to the provision of these services, De Juan continues. “Finally, a strong balance sheet and a public listing are also beneficial, as again these factors help with attracting liquidity,” he adds.

Luis Sanchez

Luis Sanchez

“Clients now demand far more options and solutions, so the technology must keep up accordingly.”

In addition, a partner of choice should offer a commitment to service and the development of long-term relationships, Chesterman adds. The white label partnership has to be commercially beneficial over the long term to both broker and partner, he warns, otherwise it is unsustainable. “The last thing a white label broker needs is to have to find a new partner and transfer their clients over, so it is imperative they choose a provider who will still be around in five years and still providing the same great level of service as promised in the initial discussions,” he adds. Furthermore, due to European regulatory change it is going to be increasingly difficult to operate a standalone brokerage. Chesterman explains: “I expect we’ll see many current brokerages changing their business model to a white label relationship, leveraging off the larger brokers’ expertise and balance sheets.” Growth in the Asian market is “still astronomical”, he adds, and a white label solution - especially one using multiple specialist providers – is a cheap and quick way to establish a brokerage. Behnam agrees, adding that there are a number of new FX hubs being created globally. “But the biggest growth, at least for Swissquote Bank, remain the Middle East and East Asia,” he says. “Not only for white labelling but also for our institutional business as well.”

According to Alsøe, Saxo Markets’ aim is to become the professional facilitator in the global financial markets, both developed and developing. “Our plan is to build on the success we have achieved with WLPs in developed financial markets and to capitalise on the opportunity for the provision of innovative trading technology in emerging and frontier markets,” he adds. One final point to consider is the continued growth and demand for FX trading globally. “There is still room for new players,” agrees Sanchez. He’s sees this growth markedly taking place in Asia, perhaps even more so in China and Latin America. “Now, new companies are seeking to make a footprint in FX,” he adds. “The overall size of this growing market, and the enormous demand that it currently embodies, continues to allow new players to successfully enter the industry.”