Saxo Bank: From online broker to global banking group

James please give us a brief  history of Saxo Bank.

Saxo was founded in 1992 by Lars Seier Christensen, Kim Fournais, and Marc Hauschildt in Copenhagen, Denmark. Originally named Midas Fondsmæglerselskab, the firm began as a small brokerage company providing clients with FX and CFDs. The founders shared a common vision of leveraging the internet with trading technology to create a new type of brokerage, a Fintech. They wanted to democratise trading and investment and technology made this possible.  

In 2001 Midas underwent a significant transformation, rebranding itself as Saxo Bank. The new name reflected the company’s aspirations to become a leading player in the global financial industry.  Throughout the early 2000s, Saxo expanded its products and presence, opening offices in London, Paris, Zurich, and Singapore.  Since then Saxo has grown into a Systemically Important Financial Institution (SIFI) in Denmark where it is Headquartered. Today the bank serves 1.3million customers directly and millions more indirectly through its White Labels.  

You have been working in this industry for a long time. How has your own career pathway developed so far?

I started in FX in 2010 working on the FX Agency desk for Market Securities Kyte Broking. Our desk covered e-FX (Spot) and Options serving both buy/sell side. Subsequently I joined a Hedge Fund, ISAM, to establish an e-FX Agency which evolved into a Prime of Prime called IS Prime. Here we aimed to address the retail brokerage industry’s liquidity requirements. In both these roles I gained valuable experience talking to both sides of the trade but also being involved in a broader business development capacity. I then moved to the far east to work for Finalto where I covered Institutional Sales. These experiences were valuable because I was exposed to different parts of the business, in different geographies, across liquidity, product, origination sales, relationship management, onboarding and client services. 

When I had the opportunity to join Citibank’s FXPB in Singapore I leapt at the chance to join a blue-chip FX company. This was a fascinating experience where I was managing FX option life-cycle events, novation’s, portfolio compressions and relationships with the most sophisticated FX traders. I came back to the UK in 2020 and have been fortunate to be with Saxo since.  

What does your day-to-day job typically involve?

We have a daily team meeting in the morning where we go over the numbers, our priorities and challenges. For most of the day I am speaking to potential new clients, existing clients and liquidity providers. I am also engaging internal teams – onboarding, credit risk, or e-trading support. I spend time looking at the client’s flow, volumes and PnL decay curves, and checking the performance of the liquidity pools we operate. 

What capital market solutions does Saxo offer for institutional firms and what mix and types of clients are you providing these for?

Saxo operates a fully integrated execution to custody business model for funded securities. This covers global equities and ETFs, investment trusts, mutual funds and fixed income. We offer several client omnibus solutions for b2b2c business. At the more involved end full White Labels allow established institutions to leverage the banks technology stack including front end platforms and business processes such as corporate actions. At entry level a simple client omnibus with APIs are available. The typical White Label client would be an established Institution which might not have optimal Digital tools and therefore makes the choice to ‘buy not build’. These clients achieve massive scale with minimal CAPEX/OPEX relative to the opportunity they aim to address.

Our clients range from banks, brokers, corporates to fund managers and family offices. We also offer a full suite of services for wealth management and of course solutions for prop trading firms.

What do your institutional clients value most about doing business with Saxo?

The clients tend to recognise the level of service. Institutional clients have several coverage points, an overall ‘relationship manager’ as well access to the Prime Services Team (effectively an institutional client services group) additionally we have a Sales Trading Desk and a E-Trading support group. The coverage teams are operational when markets are open and follow the sun from Singapore over to Europe and the UK. 

What range of instruments can institutional clients now access with Saxo?

Clients are able to access 71,000+ instruments across margin and cash products. For example, Cash Equities and ETF’s, Mutual Funds, Fixed Income, Foreign Exchange and Bullion Spot, Forward and Options, Listed and OTC Derivatives. 

FX Prime Brokerage is an important part of your Institutional offering. Please tell us more about that.

Saxo’s FX Prime Brokerage helps clients seeking capital efficiency, operational synergy and access to the markets top Liquidity Providers and Venues. Professional, corporate and institutional clients execute and manage their foreign exchange liquidity through a single, unified platform. Clients access consolidated liquidity, clearing, credit and EMS technology together with comprehensive pre- and post-trade service. OTC and Listed liquidity are available across Spot, Forward/Futures and Vanilla Options. 

The main advantage is the optionality to execute and manage flow via several different EMS mediums:  Platforms, API’s, Smart Phone APPs and Voice.  Via these clients access a substantial network of liquidity providers via sophisticated technology with high touch support. 

How have you made integration and connectivity to your services as easy as possible?

Saxo’s FXPB service supports interoperability with clients’ existing infrastructure. Saxo offers a range of APIs that enable clients to connect their proprietary trading systems, order management systems (OMS), and risk management systems with the platform. Inter-operability is enhanced by the Open (Rest) API allowing clients to absorb information packages into native systems systematically. Co-location opportunities are available in Equinix LD4, NY4 and CP3 Copenhagen.

FXPB is a very competitive industry. What sets you apart from other firms?

What sets the business apart from other prime of prime peers is twofold; Saxo operates a dual FX agency/principal liquidity model which combines the markets best liquidity together with the bank’s own unique liquidity. This reduces transaction costs for clients. Saxo FXPB offers all the top Euromoney banks, electronic communication networks (ECNs) and listed venues. Client’s co-design bespoke engagement’s and fix sessions to facilitate disclosed, semi-disclosed and anonymous participation. This ensures choice to suit their objectives, more akin to a Tier1 FXPB. 

Second Saxo offers multi-asset execution and custody. Various strategies across L/S Equity, Global Macro, Volatility, Stat Arb, Event Driven, Quantitative and Managed Futures can be deployed solely with Saxo. This brings profound operational and treasury efficiencies. For example, clients who hold securities get margin relief towards derivatives and through a single integration point enjoy consolidated execution, reporting and cash management. 

What value added and other services do you provide for your clients? 

Saxo provides high-touch, personalised, support to clients. Dedicated relationship managers and support teams are available 24/6. The relationship manager works closely with the client to understand their specific needs and objectives and provide personalized support. Support teams are highly knowledgeable, ensuring prompt and professional assistance.

Saxo pursues a fully transparent, data driven approach to transaction cost analysis (TCA) and provides clients with detailed insights into their trading activity, allowing them to monitor liquidity provider/venue performance and manage liquidity more effectively. Saxo uses a leading TCA platform FairXChange as well as its own proprietary interpretations of flow. This allows clients to better understand their business and make informed decisions. 

Saxo’s Strat’s Team generates market analysis, research and commentary which it makes available (for free) online/on-platform. The Global Market Quick Take is produced daily and explores the prominent themes of the previous 24 hours. Saxo strats are most famous for the ‘outrageous predictions’ which look to the year ahead and assesses outlier events which can move markets. Clients use this analysis in their own research notes for their clients, Saxo continually supports the b2b2c value chain.

Saxo is of course an e-FX pioneer with over 30 years of experience and as already mentioned has been designated as a Systemically Important Financial Institution (SIFI). What does that mean and what additional responsibilities does it bring with it?

The SIFI designation is a categorisation of financial institutions that play an important role in ensuring the stability and proper functioning of the financial system. Saxo’s appointment as a SIFI highlights the bank’s integral position as it supports a growing number of clients, as well as banks, brokers, asset managers and other industry participants who rely on its stability for their assets and cash as well as its platforms for market facilitation. 

The additional responsibilities include robust risk management, higher capital requirements, detailed resolution plans, rigorous stress testing and strong corporate governance. These are designed to protect the broader economy caused by any potential failings of a SIFI.

How important has your ongoing investment in technology been in helping you to stay ahead of competitors and in what sort of ways does it help you to provide a state-of-the-art experience for clients?

Saxo pursues a ‘Digital Platform First’ ethos, prioritising digital solutions and platforms for the delivery of financial services. The approach emphasises leveraging technology to enhance user experience, streamline operations, and provide clients with efficient, accessible and innovative financial services. This prioritisation helps Saxo stay at the forefront of technological advancements in the industry.

The bank continuously invests to enhance the platform and improve service. For example, it recently released FX Options ‘Strategies’ Ticket, allowing simultaneous trading on up to 10 vanilla options from the same ticket. All legs are executed in one go however where strategies combine buys and sells Vega netting applies, and spreads are tightened versus trading separate legs. It is also more convenient and controlled than trading the legs separately. 

Transaction costs are further reduced on the Delta Exchange which Saxo is happy to facilitate at mid-spot. A risk graph visualises the payoff profile at expiry. The FX options product caters to money managers covering Global Macro and Volatility. But also offers opportunities for risk managers that might be more cost effective than Spot/Forwards.

In what ways do you think the FX market has been evolving that plays into the strengths of a leading institutional provider like Saxo?

The main forces that have shaped the evolution of the FX market are on the one hand regulation and on the other technology. Our clients are dealing with a regulated European Banking Institution with a SIFI status and S&P  A- credit rating. 

We are committed to higher industry standards and take pride in being at the forefront of industry reforms. Our commitment to transparency is proof that our interests are fully aligned with our clients’. For example Saxo was one of the first institutions to sign and act in accordance with the FX Global Code: a commitment to stricter customer protection and transparency in the FX market.