Peter Brooks and Wayne Roworth: co-heads of e-FX
Sucden Financial has a multi-asset class heritage. In what ways have you carried your expertise in other asset classes over to your FX business and why is the firm uniquely positioned to offer access to e-FX liquidity?
PB: Sucden Financial has over 45 years of experience in the financial markets, for both exchange and OTC products. We have the advantage of a significant balance sheet, together with the support from our parent group, Sucden, a leader in soft commodities trading. These strengths have enabled us to develop long standing relationships with numerous tier one counterparties. In particular, our e-FX business has been able to leverage the firm’s commodities background to develop an outstanding offering in precious metals, with XAUUSD, one of our highest traded currency pairs by volume.
It’s been a while since we last interviewed Sucden Financial. How has the e-FX side of the business been shaping up recently and has your growth strategy been progressing as expected?
WR: Sucden Financial is a market leader in both soft commodities and metals and our ambition is to match this calibre in FX. We have made some key hires in recent years and built a well-rounded team with a set of skills and expertise to drive growth even further, as we see our clients and their requirements evolve.
The industry has changed over the past few years. What key requirements are brokers, banks, fund managers and professional traders now looking for when selecting a LP?
PB: Access to tier one prime brokerage services and liquidity is an increasing challenge for the industry as a whole and we’re seeing this change in real-time as new clients are finding a home with us.
The rise of quality alternatives in the non-bank liquidity provider space has numerous advantages. Clients get the benefit of scale by trading with Sucden Financial; our combined volume coupled with the quality of our clients’ flow ensures we are meaningful to our liquidity counterparties. This translates to lower trading costs.
The industry has been talking about the importance of post –trade analytics for a while now but the buy-side has generally been slow to grasp the significance to them and how liquidity can be affected. We took the initiative last year and partnered with Guy Hopkins at FairXchange to deliver a full suite of analytics.
The platform allows us to monitor our liquidity providers and harmonise it with client trading analytics to improve performance and optimise the trading environment for all. This collaboration has been well received on both sides and allows us to have meaningful conversations, backed up with data and visualisations.
Many firms act as FX liquidity providers but many find it hard to do well. How has Sucden Financial gone about achieving that?
PB: We don’t believe there’s a secret ingredient, from the beginning we’ve got the basics right; provide a competitive price, exceptional service and perhaps most importantly; we align our interests with theirs. Our 100% STP riskless principal trading model means that we don’t have a stake in the outcome of our clients’ trading activities; our role is to independently source and deliver superior liquidity.
WR: One of the key components of my role is liquidity management; our liquidity panel consists of tier one banks, regional specialists and select non-banks with whom we have built long-term and meaningful relationships. Sucden Financial’s size, multi-asset capability and position in the financial markets ensures our access to best-in-class liquidity. This puts us in a highly privileged position.
What range of services does Sucden Financial’s e-FX division now provide and how much emphasis do you place on being able to meet the more bespoke requirements for each individual client?
WR: The foundation of what we provide is access to FX markets. Our diverse set of clients means this is far more complicated than it may appear on the surface. Some clients require credit and connectivity; others need bespoke liquidity and a fully out-sourced liquidity management service. We offer complex solutions to each client and our goal is to efficiently provide them with the high-quality service and expertise to enable them to concentrate on what they do best. One of our key efforts over the past couple of years is the expansion of our connectivity options and an increase in the number of ways we can deliver FX liquidity. FX is somewhat unique in this respect with technology options seemingly limitless. Our client-base is broad and their requirements varied and therefore we now connect to over 20 platforms, aggregators, bridge providers and venues.
Sucden Financial is at the forefront of innovation in the e-FX space. What level of commitment does it take to do this and do you see the way the firm leverages technology as a competitive differentiator?
WR: Delivering innovative solutions to our clients is a key factor in our progress to date and our future. We spend a lot of time researching new opportunities to understand where the market is heading and what the trends are.
In the past year we’ve invested time and resources into post-trade analytics and post-trade settlement systems, these are both areas where we felt we could add most value compared to our peers. In both cases, we have the freedom to select independent partners, FairXchange and CobaltFX, who are able to bring their market leading technology and specialist expertise to the benefit of our e-FX client base.
Kirsty Gillies: Global Head of e-FX sales
In such a highly competitive market what makes Sucden Financial different from many other e-FX providers?
KG: As a full service FX and precious metals provider acting as 100% STP riskless principal, Sucden Financial is uniquely positioned in the e-FX market. Due to our independence, our interests are fully aligned with our clients and this is reflected in our high levels of client retention. Whilst being part of one of the largest, private financial institutions in London and benefiting from over 10 direct bank relationships plus 3 prime brokers, we also differentiate ourselves from the traditional tier one banks by being small enough to deliver a custom service and solution to each client. These direct relationships have the added benefit of reducing costs for our end clients too, by removing the need to pay a PB fee to give up every trade, and ensuring we receive unique skews not available to the general street.
KG: As an independent counterparty and using our FairXchange execution analytics tool, we look to work in partnership with both market makers and our clients to optimise the trading relationship for all involved. This is most clearly seen in our excellent fill rates which are generally 95+%. Indeed, we made the active decision to exclude ECN liquidity from our main client pool to ensure a low market impact trading environment.
KG: In addition, clients have the reassurance of a quality, prudently run counterparty with over 45 years’ experience in financial markets. As an early adopter of the FX Global Code in February 2018, we are able to publicly demonstrate Sucden Financial’s long standing alignment with its principles.
How geographically spread is your client base and how has that been changing over the past few years?
KG: Our client base is truly global in nature with clients based on every continent. Since 2016, we have seen particular growth of our footprint in Australasia and South America and, more recently, an expansion of our Japanese client base.
KG: Testament to the global nature of our business and as a result of our regional bank partnerships, core G5 strength aside, we have a proven track record in more peripheral pairs such as MXN, ZAR, TRY, Scandies, Central Europe and XAU.
What products and markets are likely to be the focus of your sales efforts over the next few years?
KG: The e-FX industry continues to evolve rapidly and staying ahead of these changes has been a key factor in our growth. At our core, we are a solutions based business and as such will be led by client demand. Key themes I see on the horizon include an expanding client footprint as larger institutional clients globally seek to improve price discovery and transparency via a non-bank liquidity provider such as ourselves. Importantly, we are a full service FX and precious metals provider with the ability to support spot, forwards, swaps, NDFs and options plus deliverable FX so are well-positioned across the board to meet the needs of a demanding institutional client base.
We are also investing heavily in future technology and as an early adopter of CobaltFX technology will ensure that we are operating the same high quality infrastructure for post-trade settlement as a tier one prime broker.
What types of clients does Sucden Financial provide institutional FX services for?
KG: Our e-FX offering is targeted at all institutional FX clients globally including hedge funds, banks, proprietary trading firms, retail brokers and corporates.
What options do clients have for accessing your FX liquidity and trading with you?
KG: We are flexible and take a client-centric approach. As such, we now have the ability to fulfil the requirements of our diverse and global client base by connecting via over 20 technology platforms. Within the Sucden Financial e-FX eco-system we offer both GUI and API connectivity, mobile trading apps and ECN access via our ultra-low latency NY4 and LD4 hubs (with TY3 due later this year).
We also have a diverse set of options for client configurations with Sucden Financial. In addition to the traditional margin based trading relationships, we have the ability to offer clean credit to select counterparties. If a client has a prime broker, we can also put in place either a 3 or 4 way give-up.
Our service is bespoke to each client and their individual requirements, rather than being constrained by a “one size fits all” approach.
What White Label services does Sucden Financial offer and how much demand are you seeing for them?
KG: We see continued demand from our retail broker clients for our White Label services via Integral, 360T or Currenex. We can also deliver MT4 or MT5 via one of our white label partners.
Phil Kim: Head of e-FX sales, Asia Pacific
Why is the Asia Pacific currently so important for Sucden Financial’s business growth and how have you been expanding the firms local footprint and institutional e-FX liquidity offerings to meet demand across the region?
PK: With nearly 60% of the global population residing in Asia, it’s no secret why Sucden Financial considers the Asia Pacific region an area of great importance and significant growth potential. Having established our Hong Kong office in 2008, we feel we have collected a wealth of local knowledge and understanding of the countries involved resulting in our being well positioned to expand our footprint within the institutional e-FX liquidity space.
Whilst in the past, Sucden Financial’s Asia presence had focused mainly the margin FX space, and our commodities clients, we have made a concerted effort to expand and encompass the institutional space as a global firm. Being a truly multi-asset financial institution, we have adapted to the growing demand in the Asian region for a suite of products such as FX options, deliverable FX, non-bank prime brokerage services along with non-deliverable forwards (NDFs) and a TY3 matching engine expected within Q4 of this year.
What are Asian FX trading firms looking for from their Liquidity Providers and what makes the service proposition from Sucden Financial so compelling for them?
PK: Asian FX trading firms are no different from the rest of the world in that they demand consistently competitive pricing, deep liquidity and an exceptionally high quality of execution.
In addition, along with our superior execution quality, we are able to demonstrate transparency in the form of unbiased execution analytics through our partnership with FairXchange, which has been very well received from both a maker and a taker perspective. This has been particularly important for our more latency sensitive APAC customers whom in the past have not been able to identify with certainty the root cause of an issue.
New regulations are impacting on both the retail and institutional FX markets all over the world. In what ways has their imposition and other associated regional factors influenced the development of your Asian e-FX business?
PK: If there is one constant within the region, it is the constant flux of regulations and the new expectations that come with them. We have witnessed government bodies and regulators updating leverage requirements, capital requirements, allowable products, etc. More recently the Chinese State Administration of Foreign Exchange (SAFE) communicated with select regulators in the Asia Pacific region to advise them on what they believe to be acceptable and unacceptable practices as it relates to Chinese persons. These changes in particular have caused a drop in volumes for the APAC retail broker client base and this in turn has a knock-on effect to all liquidity providers.
That being said, we feel that this situation presents Sucden Financial with an opportunity to emerge as one of the few remaining quality counterparties servicing a diverse client base with a strong balance sheet, where other non-bank liquidity providers may have been forced into consolidation or possibly out of business.
Political considerations may well determine the location of the future regional centres of FX trading in Asia. How is Sucden Financial positioning itself to capture the growth opportunities whatever the outcome of that may be?
PK: Sucden Financial maintains an agile operation with our e-FX APAC clients currently supported from both Hong Kong and our London Head Office around the clock. We also have the added benefit of our parent company, Sucden, holding offices in 25 countries (Asia Pacific making up 9 locations) providing scope for future expansion.
Noel Singh: Head of e-FX Business Development
What does your product roadmap look like over the coming year in terms of launching new services and client offerings?
NS: Much has been written about the merits of a strong balance sheet in the non-bank prime broker space and at Sucden Financial we’ve experienced increased demand for financial security from a diverse client base. Much of the client demand has been driven by increasing financial requirements from tier one prime brokers resulting in firms looking to the non-bank prime sector. Therefore much of our product development roadmap is driven by functional requirements from much larger institutional clients.
Sucden Financial offers much more than e-FX liquidity so please tell us about some of the other solutions and services you provide to help clients manage and optimise their e-FX businesses?
NS: Clients trading FX with Sucden Financial have a broad range of products and market access mechanisms to choose from. Offering both electronic and voice market access, clients may choose from products ranging from eFX , executable streaming prices in London or NYC, through deliverable FX to OTC FX options and exchange traded currency futures.
Deliverable FX is a valuable element of our FX product suite – a recent example being a regional bank whose clients trade for commercial purposes and therefore require full delivery of currency instead of the traditional spot rolling mechanism primarily offered by prime of primes. Given our deliverable business, combined with our direct bi-lateral liquidity and settlement relationships with over 10 tier one banks, Sucden Financial is uniquely positioned to meet the client’s requirement.
In what ways has Sucden Financial been working to enhance its non-bank FX PB service?
NS: When I joined Sucden Financial, the e-FX product was confined to the core streaming FX product however we have worked on the credit intermediation facet of the business. We can now offer clients credit access to a number of ECNs.
As many non-bank market makers now find themselves looking for alternative tier one prime brokers their ability to reach their intended client base on a disclosed basis remains a challenge. We continue to develop and enhance the credit intermediation model to support non-bank market makers in reaching counterparties who either the PB won’t face or do not have their own PB.
Currently the terms prime of prime and non-bank prime are often interchangeable however I strongly feel that firms like Sucden Financial with a strong balance sheet, resilient technology and a diverse product base clearly set themselves apart from the standard prime of prime sector. Such firms offer a credit intermediation business much more closely aligned to the tier one prime broker business than prime of primes and Sucden Financial is at the forefront of that change.
How will you be looking to strengthen your well-established e-FX business further and position the firm to meet any future challenges it may face?
NS: Sucden Financial has always partnered with innovative technology partners delivering disruptive products into the financial markets. Two such recent e-FX examples are CobaltFX and FairXchange.
Over recent years, development progress in the post trade and credit space has lagged other areas such as pricing and latency reduction. Partnering with firms like CobaltFX will provide Sucden Financial with greater efficiency in our post trade booking, reconciliation and post trade settlement processes. Cobalt’s ability to distribute credit on real-time net equity simultaneously to multiple ECN to support “at trade” credit checking will make our risk management processes even more resilient, allowing clients to access more than one trading venue without induced execution latency and at a high level provide the scale necessary to support our future growth plans.
Focusing again on our balance sheet and financial strength, credit and market risk control are our key to maintaining our financially stability therefore robust risk control technology such as CobaltFX are key to the preservation of our assets. Combined with stringent KYC checks and prudent risk allocation, Sucden Financial will remain secure for years to come.
Jessica Reid: Head of e-FX Coverage
In what ways does Sucden Financial go about trying to strengthen and nurture relationships with its existing clients and what benefits does that deliver?
JR: Listening to our clients and understanding their requirements, has resulted in the successful delivery of advanced and bespoke solutions within the eFX market. Our multifaceted team has an incredible understanding and knowledge of the FX markets; this valuable skill set gives our clients confidence, stability and many years of experience to draw upon. Consequently, Sucden Financial can continue to grow and retain relationships in this increasingly competitive market.
Is it still good enough to let your products “do all the talking” or are there other essential things required to retain the confidence and support of clients in this space nowadays?
JR: Innovative, robust and relevant products have always been at the core of Sucden Financial’s offering. We have invested heavily in the development of products such as our client portal, giving clients real time monitoring of positions and cash utilisation as well as mobile trading apps and in-depth analytical tools to deliver highly customisable pricing and execution.
In addition to this, we have built strong relationships with our vendor partners, working closely to seek excellence in both our support and technical delivery throughout all of our data centres and client base. This has been key in driving our business forward.
Electronic FX trading capabilities are often thought to relate almost entirely to technology but how important is Sucden Financial’s level of customer services and execution support in helping you win new business?
JR: Within an aggressive marketplace such as eFX, we are constantly competing for customers. Customer satisfaction is seen as a major differentiator, playing a key role in winning new business.
We have always made customer satisfaction central to its business strategy, investing in a 24 hour coverage team and sales offices around the globe to ensure a deep understanding of the culture and practices.
By regularly measuring and tracking customer satisfaction, we can make informed decisions around improving processes to increase the overall quality of our customer service and execution of support. This undoubtedly gives us an edge to rise above the competition.