FX prime brokers are in an arms race to deliver cutting-edge technology as artificial intelligence and automation reshape the industry. The push for digital transformation has become existential, with firms investing heavily in tools that promise faster execution, better risk management, and more efficient operations, Vivek Shankar finds.
Foreign exchange prime brokerage is undergoing a significant transformation, as market volatility and technological disruption reshape how institutions access and trade FX.
The sector’s evolution comes amid a strong start to 2025, with major institutional FX venues reporting double-digit volume increases in January compared to the previous month. Yet beneath the surface, a more complex picture emerges: nearly 40% of hedge funds have scaled back their FX prime brokerage relationships in the past three years, creating opportunities for a new breed of intermediaries offering “Prime of Prime” services to fill the void left by traditional players exiting the market.
Against this backdrop, technological innovation is fundamentally altering how prime brokers operate, with automation changing how processes work. James Dewdney, Associate Director, Instiutional Sales, Saxo, strikes a positive note when asked about its impact.
“Automation frees up headcount to do other things,” he says. “For example, manually monitoring margin usage and NOP limits is time-consuming. It requires dedicated headcounts who would have limited bandwidth for other responsibilities.”
Reducing headcount burden is just one of the many ways technology is changing how FXPBs approach their workflows.
FXPBs turn to digital tools
The push for automation goes beyond just freeing up resources. For many firms, it’s becoming a critical component of risk management and operational efficiency.
“It is more accurate,” continues Dewdney. “The present-day margin/risk engines embedded within vendor solutions or proprietary technology offer dependable real-time data.” He notes that manually understanding a client’s obligations across multiple currencies and tenors would be time-consuming without automation.
This automation trend is particularly crucial for larger operations. “Depending on the size of the FXPB, it might not be possible to run the business without these critical processes being automated,” Dewdney says, highlighting how essential these systems have become to modern FXPB.
“The present-day margin/risk engines embedded within vendor solutions or proprietary technology offer dependable real-time data.”
James Dewdney
The transformation is most visible in trade processing and risk management. Daniel Smith, Head of Electronic Trading & Execution – APAC at 26 Degrees Global Markets, emphasizes how automation is reshaping the entire trade lifecycle. “By reducing operational burdens and minimising the requirement for manual intervention, providers can lower the risk of human error whilst improving efficiency and transparency,” he says.
These improvements are driving measurable benefits across the industry. According to Lochlan White, CCO of Scope Prime, the impact is particularly notable in critical processes like margin calls. “There are huge advantages from automating the FXPB processes that can deliver immediate and measurable benefits,” White says. “A good example here is margin calls, which if automated can reduce critical delays when it comes to collateral management and in turn reduce counterparty risk, especially in fast moving markets.”
The evolution is particularly striking when compared to historical practices. Dewdney recalls his early career experiences: “In my first job in FX back in 2010 I used to confirm trades back to an interdealer broker. They had around 10 voice brokers, and it became a muddle in fast markets with time consuming reconciliations required after 5pm.”
Today, at Saxo, he notes they offer clients real-time position keeping via platforms and APIs, with automated confirmations through email or FTP.
Automation is becoming a critical component of risk management and operational efficiency
For firms like 26 Degrees, this has prompted substantial investment in technology. “We’ve worked closely alongside our technology partners to leverage existing workflows and invest in further enhancing our proprietary technology,” Smith says. A recent overhaul of their internal dealing and risk systems has enhanced automation capabilities, allowing dealing and operations teams to focus on higher-value activities.
The results of these investments are becoming clear across the industry. White reports that operational errors can be reduced by as much as 40% through automation, a figure he says is supported by their experience working with FXPBs. This dramatic reduction in errors is particularly significant given the high-stakes nature of FX trading.
The impact of digital tools extends deep into risk management practices. “They play a critical role offering PBs real time, accurate interpretations from complex data sets which allow them to better manage risk,” Dewdney says. “It also offers PBs scalability so they can offer the service at a competitive price.”
Market volatility has made these tools increasingly vital. “During periods of significant market volatility, digital tools are more critical than ever, giving dealing teams the flexibility to manage workflows seamlessly and monitor risks in real-time,” Smith says.
This is particularly crucial, he notes, when operating a multi-PB setup where exposures can build quickly across multiple counterparties.
White emphasizes the fundamental importance of risk pricing in the industry. “Pricing risk sits at the very heart of this industry, so anything that can be done in terms of mitigation here is of real benefit,” he says. “Automation allows for real-time monitoring of credit utilization and counterparty exposures, which in turn facilitates better risk assessment and proactive decision making.”
The alternative to such digital tools would be problematic, according to Dewdney. “Without the plethora of digital tools employed by brokers, managing and interpreting critical daily events in the business would take a lot longer,” he says. “Markets would be rife with human error, reducing efficiency and eventually faith in the overall system.”
“During periods of significant market volatility, digital tools are more critical than ever, giving dealing teams the flexibility to manage workflows seamlessly and monitor risks in real-time,”
Daniel Smith
For 26 Degrees, investment in digital infrastructure has yielded tangible benefits. “Real-time visibility, particularly with regards to market and counterparty exposures, has allowed teams to make more proactive and efficient decisions, based on real time data, ultimately leading to a reduction in inefficient credit allocation or usage,” Smith says.
The technology race in prime brokerage has become particularly intense and the evolution of these digital tools has transformed how firms approach credit monitoring. White points out that “anything that helps increase the prospect of a potential credit breach being spotted before it occurs can only be good.” This proactive approach to risk management represents a significant shift from traditional reactive measures.
26 Degrees has made this a central part of their strategy. “Our continued investment in technology has been instrumental in enhancing pre- and post-trade transparency, driving more advanced reporting, risk management, and workflow optimisation,” Smith says. Such investments have become crucial for firms looking to maintain competitive advantage in the market.
These advancements in digital tools have particular significance for multi-counterparty setups, where real-time monitoring and risk assessment become exponentially more complex. The ability to track and manage exposures across multiple venues and counterparties in real-time has become a key differentiator for prime brokers.
Automated workflows are also transforming how prime brokers manage liquidity across their networks. “Dynamic credit allocation tools certainly help PBs reduce manual touchpoints,” Dewdney says. “They also improve the customers’ UX as the risks of trade rejections, because credit is exhausted at one venue, or another is reduced.”
Smith points to broader efficiency gains in capital deployment. “Without real-time monitoring, efficiently deploying capital can become time-consuming and complex, but with automated workflows in place, prime broking networks can make quicker, data-driven decisions,” he says.
These improvements are particularly evident in areas like securities lending and portfolio margining, where automation has enhanced liquidity across networks.
Operational errors can be significantly reduced through automation
The impact on capital efficiency has been significant, according to White. “Anything that can accelerate trade processing and remove the accompanying inefficiencies frees up capital enabling it to be redeployed faster,” he says. “Optimizing settlement processes and integrating collateral management systems means that PBs can minimize the amount of liquidity that’s tied up in operational buffers.”
The alternative to automation in liquidity management presents clear challenges. “Manually right sizing limits on an ongoing basis is likely to prove a thankless task as liquidity is dynamic,” Dewdney says. “I cannot imagine a Prime Broker being thanked by a customer for doing so, rather than reprimanded for not doing so!”
These improvements in capital efficiency are yielding competitive advantages. White notes that reduced operational buffers come “with the by-product of improved pricing and in turn offering a more competitive offering. Understandably with these outcomes, automation has been swift.”
Digital tools transform FXPB data analysis and portfolio management
New toolsets are transforming portfolio optimization and trade compression, with real-time capabilities leading to significant operational improvements. “Portfolio Optimization opportunities can be illustrated in real time with the right digital tools,” Dewdney says, a development that’s proving crucial as banks adapt to post-Basel III requirements.
This regulatory shift has intensified the focus on a critical area. “Banks and FXPB’s have been working towards more efficient compression of their books,” Smith says, noting that while ‘risk-free compression’ of identical trades is straightforward, the real challenge lies in handling trades with different economics or maturities.
The advances in automation are addressing historical pain points, particularly in trade novation.
As Dewdney explains, while identifying compression opportunities was manageable, the process itself was burdensome: “It was the novation’s element that chewed up the FX Prime Brokers time… Circulating novation requests and requiring three parties to join the endeavor within X number of days was inefficient!”
This inefficiency has driven changes in how FXPBs approach compression. Smith points out that limiting compression to perfectly matching trades severely restricts opportunities and benefits. “For FXPB’s to maintain competitiveness, a balance must be struck between constraining and managing residual risk and offsetting a sufficient population of trades for efficient portfolio optimisation.”
Real-time capabilities have become central to this balancing act. Dewdney’s emphasis on accuracy through digitization aligns with the industry’s push toward more sophisticated compression strategies, enabling firms to identify and execute optimization opportunities more effectively.
The complexity of modern portfolio optimization extends beyond simple trade matching. “The industry has come a long way in this regard,” Smith says, highlighting ongoing investments in proprietary technology to tackle operational complexity, credit utilization calculations, and risk management.
The intersection of technology, big data, and artificial intelligence is reshaping how FX prime brokers approach reporting and analysis. “Financial market businesses are a confluence of technology, big data and artificial intelligence,” Dewdney says, pointing to his firm’s use of sophisticated analysis tools that go beyond traditional transaction cost analysis (TCA).
These advancements are particularly crucial given the evolving regulatory landscape. Smith notes that “with the growing complexity of regulatory requirements, automated reporting and regulatory functions has become increasingly resource-intensive,” making digital tools essential for maintaining efficient compliance.
“Automation allows for real-time monitoring of credit utilization and counterparty exposures, which in turn facilitates better risk assessment and proactive decision making.”
Lochlan White
The sophistication of modern analysis platforms reflects this growing complexity. At Saxo, Dewdney explains, they use FairXChange to gain deeper insights into their FX liquidity business. “This application is a lot richer than simple TCA,” he says. “The platform has embraced this dynamic to help their clients establish unique, actionable insights into their businesses.”
The scale of modern FX operations makes such tools indispensable. “Saxo serves some of the largest retail intermediaries in the world, many of whom have over one million active clients. It is nearly impossible to carry out this analysis manually,” Dewdney says, highlighting how digital tools have become essential for managing large-scale operations.
“Digital toolsets are enhancing reporting and data analysis functions in FXPB by providing key tools such as real-time reporting and risk management dashboards,” Smith says, emphasizing how these improvements boost transparency while reducing operational costs.
The benefits extend beyond just operational efficiency. Dewdney points to the strategic advantages: “The upside to us is being able to focus on yield whilst policing the less desirable flow too. The result of this ongoing promote / prohibit approach is a more equitable business for clients and liquidity providers alike.”
Real-time insights have become particularly valuable in today’s fast-moving markets. Smith notes that these tools are “providing more accurate and timely insights,” enabling firms to make better-informed decisions quickly and efficiently.
The demand for sophisticated reporting capabilities continues to grow. As Smith explains, such tools are “becoming increasingly important as the demand for timely, accurate, and compliant reporting grows in an ever-evolving regulatory landscape.”
Real-time insights have become particularly valuable in today’s fast-moving markets
Low-Latency systems in tech race
Leading FX prime brokers are making significant infrastructure investments to support high-frequency trading demands. “Investing in high performance soft/hardware; state-of-the-art application servers, storage solutions, dedicated fiber connections in major data centers together with redundancy environments,” Dewdney says, noting how this creates “a secure, redundant and low latency environment suitable for sophisticated clients.”
The competitive landscape has pushed firms to optimize multiple aspects of their trading infrastructure. “Leading FXPBs like 26 Degrees have continuously invested in and optimised low-latency trading infrastructure, including both proprietary and vendor systems,” Smith says, emphasizing a balanced approach between internal development and external expertise.
White highlights the critical nature of these investments: “Latency will always be a watch word in the world of FX trading, so removing this as much as possible at every step of the journey is vital.” He points to specific industry trends, including “the co-location of servers and heavy investment in technology by the PBs to meet the needs of hedge funds and higher frequency traders.”
Beyond pure speed, firms are developing more sophisticated execution capabilities. Smith describes his firm’s development of “a suite of algos suited to the increasingly fragmented liquidity landscape we find ourselves in presently.” These range from “time, volume, participation and market impact based-based executions to extended hours Equity market executions and access to alternative liquidity sources.”
The drive for lower latency has broader implications for market efficiency. “The cost of orders not being filled first time is well reported and the response of market participants in recent years reflects this,” White says.
Artificial intelligence will increasingly be embedded into Prime Broker products and services
For firms serving smaller market participants, these technological advances enable new service offerings. “As a provider of outsourced trading services for small to medium sized funds, our high touch desks look to enhance our clients’ trading outcomes,” Smith says, noting how this allows client flow to be “executed in a more cost-effective way by leveraging the expertise of our teams for execution requirements around the clock.”
The emphasis on redundancy in these systems highlights how critical reliability has become alongside speed. Dewdney’s mention of redundancy environments underscores a key point: sophisticated clients require not just low latency, but consistent and reliable low latency, with real-time risk management capabilities maintained even at high trading volumes.
Transparency has become equally important as speed in modern trading systems. Smith points to how “real-time reporting and Transaction Cost Analysis (TCA) have been integrated to ensure the necessary levels of transparency,” enabling clients to both monitor execution quality and optimize their trading strategies in real-time.
When asked about the benefits digital transformation in FX prime brokerage has delivered, Dewdney notes that “This would be a long list,” before outlining key advantages including “realtime risk management” and improved accessibility, noting that “digital FXPB platforms allow clients to access critical trading data and carry out BAU operations online, anywhere.”
Cost efficiency has emerged as a significant benefit. “Automation via digitization improves operational efficiencies, i.e. through lower head counts and fewer costly errors,” Dewdney says. This aligns with Smith’s observation that “automation has significantly reduced the operational burden and costs associated with manual processes while increasing scalability.”
Digital tools have become fundamental to the industry. “Make no mistake, counterparties absolutely expect to see digital tools – it’s really a given in 2025,” White says, emphasizing how these tools reduce operational risks and enable more sophisticated analytics.
The impact on liquidity management has been particularly notable. Dewdney points to “24/7 liquidity access with reduced intermediation” that has “tightened spreads, mitigated human error thus lowering transaction and clearing costs.”
Blockchain technology also appears poised for adoption in the industry
Portfolio optimization represents another key benefit. “By decreasing gross notional exposure FXPBs can improve their balance sheets, reduce counterparty risk and improve regulatory compliance,” Dewdney says. This development has particular significance for balance sheet management and regulatory requirements.
Regulatory technology has also seen significant advancement. Dewdney highlights progress in “regtech,” including “the automation of ID verification and transaction monitoring,” enabling prime brokers to manage counterparty risks more effectively.
The evolution of data analytics has enhanced client relationships. Smith points to his firm’s proprietary platform ‘Insights,’ which “allows us to deliver actionable insights that can not only improve performance and increase transparency but also help foster a more productive relationship with our clients.”
As White notes, the industry focus has shifted from revolution to refinement: “By now, this is a case of finessing rather than revolutionizing the industry,” with digital tools providing “another layer when it comes to better reporting or faster risk monitoring.”
Technology race points to FXPB’s data-driven future
So where does the future of FXPB lie? Artificial intelligence emerges as a key theme, one might say predictably. “Artificial intelligence will increasingly be embedded into Prime Broker products and services,” Dewdney says, highlighting potential applications in “personalizing client services and choosing which data to highlight to clients and when.”
The industry is already seeing this transformation take shape. “We are already witnessing further acceptance and integration of AI and machine learning models,” Smith says, though he notes these “efficiencies need to be balanced with an appropriate governance framework for decision implementation.”
White points to AI’s specific applications in risk management: “Artificial intelligence holds significant potential for the FXPB industry in the near term as it has the potential to enhance risk monitoring as well as highlighting toxic flow.”
Beyond AI, blockchain technology appears poised for adoption. “The blockchain is also on the cusp of seeing meaningful adoption in the industry, something that would streamline settlement and improve data security,” White says.
The scope of automation continues to expand. Smith points to “continued automation across the entire trade lifecycle” driving greater efficiency and reducing operational costs. This evolution, he suggests, will enable “FXPBs to offer more scalable, cost-effective, and data-driven services.”
White also notes that “further developments in APIs are imminent, enabling better integration of the FXPBs into proprietary trading systems.”
The intersection of technology, big data, and artificial intelligence is reshaping FX Prime Brokerage
Risk management capabilities are set to become more sophisticated. Dewdney highlights how “AI monitoring can also establish unusual patterns in transaction data and even prevent fat finger events,” providing “an added layer of personalized service and risk management.” Beyond execution, AI’s influence extends to broader operations. Smith notes its potential applications “not just in pricing decisions, but also capital deployment and treasury functions based on probable credit usage.”
The transformation of FX prime brokerage through digital tools and automation shows no signs of slowing. As regulatory requirements grow more complex and clients demand greater efficiency, the industry’s technology race looks set to intensify.
Yet beneath the drive for faster systems and smarter tools lies a fundamental shift in how prime brokers operate and serve their clients. The focus has moved from simply providing access to liquidity toward offering comprehensive, data-driven solutions that enhance every aspect of the trading lifecycle.
This evolution suggests that success in FX prime brokerage will increasingly depend not just on the breadth of services offered, but on the sophistication of the digital tools that deliver them.
Taking a peek inside the digital revolution reshaping FX Prime Brokerage
FX prime brokers are in an arms race to deliver cutting-edge technology as artificial intelligence and automation reshape the industry. The push for digital transformation has become existential, with firms investing heavily in tools that promise faster execution, better risk management, and more efficient operations, Vivek Shankar finds.
Foreign exchange prime brokerage is undergoing a significant transformation, as market volatility and technological disruption reshape how institutions access and trade FX.
The sector’s evolution comes amid a strong start to 2025, with major institutional FX venues reporting double-digit volume increases in January compared to the previous month. Yet beneath the surface, a more complex picture emerges: nearly 40% of hedge funds have scaled back their FX prime brokerage relationships in the past three years, creating opportunities for a new breed of intermediaries offering “Prime of Prime” services to fill the void left by traditional players exiting the market.
Against this backdrop, technological innovation is fundamentally altering how prime brokers operate, with automation changing how processes work. James Dewdney, Associate Director, Instiutional Sales, Saxo, strikes a positive note when asked about its impact.
“Automation frees up headcount to do other things,” he says. “For example, manually monitoring margin usage and NOP limits is time-consuming. It requires dedicated headcounts who would have limited bandwidth for other responsibilities.”
Reducing headcount burden is just one of the many ways technology is changing how FXPBs approach their workflows.
FXPBs turn to digital tools
The push for automation goes beyond just freeing up resources. For many firms, it’s becoming a critical component of risk management and operational efficiency.
“It is more accurate,” continues Dewdney. “The present-day margin/risk engines embedded within vendor solutions or proprietary technology offer dependable real-time data.” He notes that manually understanding a client’s obligations across multiple currencies and tenors would be time-consuming without automation.
This automation trend is particularly crucial for larger operations. “Depending on the size of the FXPB, it might not be possible to run the business without these critical processes being automated,” Dewdney says, highlighting how essential these systems have become to modern FXPB.
“The present-day margin/risk engines embedded within vendor solutions or proprietary technology offer dependable real-time data.”
James Dewdney
The transformation is most visible in trade processing and risk management. Daniel Smith, Head of Electronic Trading & Execution – APAC at 26 Degrees Global Markets, emphasizes how automation is reshaping the entire trade lifecycle. “By reducing operational burdens and minimising the requirement for manual intervention, providers can lower the risk of human error whilst improving efficiency and transparency,” he says.
These improvements are driving measurable benefits across the industry. According to Lochlan White, CCO of Scope Prime, the impact is particularly notable in critical processes like margin calls. “There are huge advantages from automating the FXPB processes that can deliver immediate and measurable benefits,” White says. “A good example here is margin calls, which if automated can reduce critical delays when it comes to collateral management and in turn reduce counterparty risk, especially in fast moving markets.”
The evolution is particularly striking when compared to historical practices. Dewdney recalls his early career experiences: “In my first job in FX back in 2010 I used to confirm trades back to an interdealer broker. They had around 10 voice brokers, and it became a muddle in fast markets with time consuming reconciliations required after 5pm.”
Today, at Saxo, he notes they offer clients real-time position keeping via platforms and APIs, with automated confirmations through email or FTP.
For firms like 26 Degrees, this has prompted substantial investment in technology. “We’ve worked closely alongside our technology partners to leverage existing workflows and invest in further enhancing our proprietary technology,” Smith says. A recent overhaul of their internal dealing and risk systems has enhanced automation capabilities, allowing dealing and operations teams to focus on higher-value activities.
The results of these investments are becoming clear across the industry. White reports that operational errors can be reduced by as much as 40% through automation, a figure he says is supported by their experience working with FXPBs. This dramatic reduction in errors is particularly significant given the high-stakes nature of FX trading.
The impact of digital tools extends deep into risk management practices. “They play a critical role offering PBs real time, accurate interpretations from complex data sets which allow them to better manage risk,” Dewdney says. “It also offers PBs scalability so they can offer the service at a competitive price.”
Market volatility has made these tools increasingly vital. “During periods of significant market volatility, digital tools are more critical than ever, giving dealing teams the flexibility to manage workflows seamlessly and monitor risks in real-time,” Smith says.
This is particularly crucial, he notes, when operating a multi-PB setup where exposures can build quickly across multiple counterparties.
White emphasizes the fundamental importance of risk pricing in the industry. “Pricing risk sits at the very heart of this industry, so anything that can be done in terms of mitigation here is of real benefit,” he says. “Automation allows for real-time monitoring of credit utilization and counterparty exposures, which in turn facilitates better risk assessment and proactive decision making.”
The alternative to such digital tools would be problematic, according to Dewdney. “Without the plethora of digital tools employed by brokers, managing and interpreting critical daily events in the business would take a lot longer,” he says. “Markets would be rife with human error, reducing efficiency and eventually faith in the overall system.”
“During periods of significant market volatility, digital tools are more critical than ever, giving dealing teams the flexibility to manage workflows seamlessly and monitor risks in real-time,”
Daniel Smith
For 26 Degrees, investment in digital infrastructure has yielded tangible benefits. “Real-time visibility, particularly with regards to market and counterparty exposures, has allowed teams to make more proactive and efficient decisions, based on real time data, ultimately leading to a reduction in inefficient credit allocation or usage,” Smith says.
The technology race in prime brokerage has become particularly intense and the evolution of these digital tools has transformed how firms approach credit monitoring. White points out that “anything that helps increase the prospect of a potential credit breach being spotted before it occurs can only be good.” This proactive approach to risk management represents a significant shift from traditional reactive measures.
26 Degrees has made this a central part of their strategy. “Our continued investment in technology has been instrumental in enhancing pre- and post-trade transparency, driving more advanced reporting, risk management, and workflow optimisation,” Smith says. Such investments have become crucial for firms looking to maintain competitive advantage in the market.
These advancements in digital tools have particular significance for multi-counterparty setups, where real-time monitoring and risk assessment become exponentially more complex. The ability to track and manage exposures across multiple venues and counterparties in real-time has become a key differentiator for prime brokers.
Automated workflows are also transforming how prime brokers manage liquidity across their networks. “Dynamic credit allocation tools certainly help PBs reduce manual touchpoints,” Dewdney says. “They also improve the customers’ UX as the risks of trade rejections, because credit is exhausted at one venue, or another is reduced.”
Smith points to broader efficiency gains in capital deployment. “Without real-time monitoring, efficiently deploying capital can become time-consuming and complex, but with automated workflows in place, prime broking networks can make quicker, data-driven decisions,” he says.
These improvements are particularly evident in areas like securities lending and portfolio margining, where automation has enhanced liquidity across networks.
The impact on capital efficiency has been significant, according to White. “Anything that can accelerate trade processing and remove the accompanying inefficiencies frees up capital enabling it to be redeployed faster,” he says. “Optimizing settlement processes and integrating collateral management systems means that PBs can minimize the amount of liquidity that’s tied up in operational buffers.”
The alternative to automation in liquidity management presents clear challenges. “Manually right sizing limits on an ongoing basis is likely to prove a thankless task as liquidity is dynamic,” Dewdney says. “I cannot imagine a Prime Broker being thanked by a customer for doing so, rather than reprimanded for not doing so!”
These improvements in capital efficiency are yielding competitive advantages. White notes that reduced operational buffers come “with the by-product of improved pricing and in turn offering a more competitive offering. Understandably with these outcomes, automation has been swift.”
Digital tools transform FXPB data analysis and portfolio management
New toolsets are transforming portfolio optimization and trade compression, with real-time capabilities leading to significant operational improvements. “Portfolio Optimization opportunities can be illustrated in real time with the right digital tools,” Dewdney says, a development that’s proving crucial as banks adapt to post-Basel III requirements.
This regulatory shift has intensified the focus on a critical area. “Banks and FXPB’s have been working towards more efficient compression of their books,” Smith says, noting that while ‘risk-free compression’ of identical trades is straightforward, the real challenge lies in handling trades with different economics or maturities.
The advances in automation are addressing historical pain points, particularly in trade novation.
As Dewdney explains, while identifying compression opportunities was manageable, the process itself was burdensome: “It was the novation’s element that chewed up the FX Prime Brokers time… Circulating novation requests and requiring three parties to join the endeavor within X number of days was inefficient!”
This inefficiency has driven changes in how FXPBs approach compression. Smith points out that limiting compression to perfectly matching trades severely restricts opportunities and benefits. “For FXPB’s to maintain competitiveness, a balance must be struck between constraining and managing residual risk and offsetting a sufficient population of trades for efficient portfolio optimisation.”
Real-time capabilities have become central to this balancing act. Dewdney’s emphasis on accuracy through digitization aligns with the industry’s push toward more sophisticated compression strategies, enabling firms to identify and execute optimization opportunities more effectively.
The complexity of modern portfolio optimization extends beyond simple trade matching. “The industry has come a long way in this regard,” Smith says, highlighting ongoing investments in proprietary technology to tackle operational complexity, credit utilization calculations, and risk management.
The intersection of technology, big data, and artificial intelligence is reshaping how FX prime brokers approach reporting and analysis. “Financial market businesses are a confluence of technology, big data and artificial intelligence,” Dewdney says, pointing to his firm’s use of sophisticated analysis tools that go beyond traditional transaction cost analysis (TCA).
These advancements are particularly crucial given the evolving regulatory landscape. Smith notes that “with the growing complexity of regulatory requirements, automated reporting and regulatory functions has become increasingly resource-intensive,” making digital tools essential for maintaining efficient compliance.
“Automation allows for real-time monitoring of credit utilization and counterparty exposures, which in turn facilitates better risk assessment and proactive decision making.”
Lochlan White
The sophistication of modern analysis platforms reflects this growing complexity. At Saxo, Dewdney explains, they use FairXChange to gain deeper insights into their FX liquidity business. “This application is a lot richer than simple TCA,” he says. “The platform has embraced this dynamic to help their clients establish unique, actionable insights into their businesses.”
The scale of modern FX operations makes such tools indispensable. “Saxo serves some of the largest retail intermediaries in the world, many of whom have over one million active clients. It is nearly impossible to carry out this analysis manually,” Dewdney says, highlighting how digital tools have become essential for managing large-scale operations.
“Digital toolsets are enhancing reporting and data analysis functions in FXPB by providing key tools such as real-time reporting and risk management dashboards,” Smith says, emphasizing how these improvements boost transparency while reducing operational costs.
The benefits extend beyond just operational efficiency. Dewdney points to the strategic advantages: “The upside to us is being able to focus on yield whilst policing the less desirable flow too. The result of this ongoing promote / prohibit approach is a more equitable business for clients and liquidity providers alike.”
Real-time insights have become particularly valuable in today’s fast-moving markets. Smith notes that these tools are “providing more accurate and timely insights,” enabling firms to make better-informed decisions quickly and efficiently.
The demand for sophisticated reporting capabilities continues to grow. As Smith explains, such tools are “becoming increasingly important as the demand for timely, accurate, and compliant reporting grows in an ever-evolving regulatory landscape.”
Low-Latency systems in tech race
Leading FX prime brokers are making significant infrastructure investments to support high-frequency trading demands. “Investing in high performance soft/hardware; state-of-the-art application servers, storage solutions, dedicated fiber connections in major data centers together with redundancy environments,” Dewdney says, noting how this creates “a secure, redundant and low latency environment suitable for sophisticated clients.”
The competitive landscape has pushed firms to optimize multiple aspects of their trading infrastructure. “Leading FXPBs like 26 Degrees have continuously invested in and optimised low-latency trading infrastructure, including both proprietary and vendor systems,” Smith says, emphasizing a balanced approach between internal development and external expertise.
White highlights the critical nature of these investments: “Latency will always be a watch word in the world of FX trading, so removing this as much as possible at every step of the journey is vital.” He points to specific industry trends, including “the co-location of servers and heavy investment in technology by the PBs to meet the needs of hedge funds and higher frequency traders.”
Beyond pure speed, firms are developing more sophisticated execution capabilities. Smith describes his firm’s development of “a suite of algos suited to the increasingly fragmented liquidity landscape we find ourselves in presently.” These range from “time, volume, participation and market impact based-based executions to extended hours Equity market executions and access to alternative liquidity sources.”
The drive for lower latency has broader implications for market efficiency. “The cost of orders not being filled first time is well reported and the response of market participants in recent years reflects this,” White says.
For firms serving smaller market participants, these technological advances enable new service offerings. “As a provider of outsourced trading services for small to medium sized funds, our high touch desks look to enhance our clients’ trading outcomes,” Smith says, noting how this allows client flow to be “executed in a more cost-effective way by leveraging the expertise of our teams for execution requirements around the clock.”
The emphasis on redundancy in these systems highlights how critical reliability has become alongside speed. Dewdney’s mention of redundancy environments underscores a key point: sophisticated clients require not just low latency, but consistent and reliable low latency, with real-time risk management capabilities maintained even at high trading volumes.
Transparency has become equally important as speed in modern trading systems. Smith points to how “real-time reporting and Transaction Cost Analysis (TCA) have been integrated to ensure the necessary levels of transparency,” enabling clients to both monitor execution quality and optimize their trading strategies in real-time.
When asked about the benefits digital transformation in FX prime brokerage has delivered, Dewdney notes that “This would be a long list,” before outlining key advantages including “realtime risk management” and improved accessibility, noting that “digital FXPB platforms allow clients to access critical trading data and carry out BAU operations online, anywhere.”
Cost efficiency has emerged as a significant benefit. “Automation via digitization improves operational efficiencies, i.e. through lower head counts and fewer costly errors,” Dewdney says. This aligns with Smith’s observation that “automation has significantly reduced the operational burden and costs associated with manual processes while increasing scalability.”
Digital tools have become fundamental to the industry. “Make no mistake, counterparties absolutely expect to see digital tools – it’s really a given in 2025,” White says, emphasizing how these tools reduce operational risks and enable more sophisticated analytics.
The impact on liquidity management has been particularly notable. Dewdney points to “24/7 liquidity access with reduced intermediation” that has “tightened spreads, mitigated human error thus lowering transaction and clearing costs.”
Portfolio optimization represents another key benefit. “By decreasing gross notional exposure FXPBs can improve their balance sheets, reduce counterparty risk and improve regulatory compliance,” Dewdney says. This development has particular significance for balance sheet management and regulatory requirements.
Regulatory technology has also seen significant advancement. Dewdney highlights progress in “regtech,” including “the automation of ID verification and transaction monitoring,” enabling prime brokers to manage counterparty risks more effectively.
The evolution of data analytics has enhanced client relationships. Smith points to his firm’s proprietary platform ‘Insights,’ which “allows us to deliver actionable insights that can not only improve performance and increase transparency but also help foster a more productive relationship with our clients.”
As White notes, the industry focus has shifted from revolution to refinement: “By now, this is a case of finessing rather than revolutionizing the industry,” with digital tools providing “another layer when it comes to better reporting or faster risk monitoring.”
Technology race points to FXPB’s data-driven future
So where does the future of FXPB lie? Artificial intelligence emerges as a key theme, one might say predictably. “Artificial intelligence will increasingly be embedded into Prime Broker products and services,” Dewdney says, highlighting potential applications in “personalizing client services and choosing which data to highlight to clients and when.”
The industry is already seeing this transformation take shape. “We are already witnessing further acceptance and integration of AI and machine learning models,” Smith says, though he notes these “efficiencies need to be balanced with an appropriate governance framework for decision implementation.”
White points to AI’s specific applications in risk management: “Artificial intelligence holds significant potential for the FXPB industry in the near term as it has the potential to enhance risk monitoring as well as highlighting toxic flow.”
Beyond AI, blockchain technology appears poised for adoption. “The blockchain is also on the cusp of seeing meaningful adoption in the industry, something that would streamline settlement and improve data security,” White says.
The scope of automation continues to expand. Smith points to “continued automation across the entire trade lifecycle” driving greater efficiency and reducing operational costs. This evolution, he suggests, will enable “FXPBs to offer more scalable, cost-effective, and data-driven services.”
White also notes that “further developments in APIs are imminent, enabling better integration of the FXPBs into proprietary trading systems.”
The intersection of technology,
big data, and artificial intelligence
is reshaping FX Prime Brokerage
Risk management capabilities are set to become more sophisticated. Dewdney highlights how “AI monitoring can also establish unusual patterns in transaction data and even prevent fat finger events,” providing “an added layer of personalized service and risk management.” Beyond execution, AI’s influence extends to broader operations. Smith notes its potential applications “not just in pricing decisions, but also capital deployment and treasury functions based on probable credit usage.”
The transformation of FX prime brokerage through digital tools and automation shows no signs of slowing. As regulatory requirements grow more complex and clients demand greater efficiency, the industry’s technology race looks set to intensify.
Yet beneath the drive for faster systems and smarter tools lies a fundamental shift in how prime brokers operate and serve their clients. The focus has moved from simply providing access to liquidity toward offering comprehensive, data-driven solutions that enhance every aspect of the trading lifecycle.
This evolution suggests that success in FX prime brokerage will increasingly depend not just on the breadth of services offered, but on the sophistication of the digital tools that deliver them.