With Eric Donovan, Global Head of Institutional FX at StoneX Group

November 2023 in Cover Interviews

StoneX Group Inc is a diversified financial services firm providing institutional traders access to deep global liquidity in markets all over the world. We spoke with Eric Donovan, Global Head of Institutional FX at the company, to learn more about the business he is running and the key people who are helping him.

Eric Donovan

Eric, you have been working in the financial trading industry for a long time. Please tell us a little about your background and career to date.

I went to Rutgers University, close to NYC, which gave me some opportunities to work in the hedge fund and trading industry while I was still in college, so I was very lucky in that respect. After graduating I moved to Chicago and began working for an options market-making firm, where I became a floor trader in S&P 500 options. I did that for 5 years, then left to start a firm that was focused more on automated trading systems. The firm did very well through the financial crisis and the flash crash. In 2014, I decided to quit trading and go to law school, because I saw the industry changing so much after Dodd-Frank and it was getting harder and harder to survive as a small firm. Then, kind of on a whim, I took a job at StoneX which I planned to stay at for just a few months until my classes started. I ended up loving the company, withdrew from law school, and have been here for almost 9 years. That was one of the best decisions I ever made.

What does your day-to-day job involve and what key responsibilities do you have?

My energy is entirely focused on building the best experience imaginable for institutions involved in trading foreign exchange. That means building trading systems that continually lower our cost structure and improve performance, so we can deliver great products and services at a price point that provides real value. In addition, scale is significant so I also dedicate time to our sales and marketing efforts.

What range of FX execution and Liquidity services does StoneX Pro offer and what mix and types of clients are you providing these for?

StoneX Pro bundles everything needed to tap into the global FX market in a very simple, turnkey account structure. This includes institutional-grade liquidity in spot, forwards, NDF, options, NDOs, deliverable FX and interest rates swaps for corporate and financial institutions. Our clients range from asset managers, hedge funds, regional banks, financial institutions, money service businesses, and a global network of corporates.

StoneX Pro has the support of your powerful parent company, StoneX Group Inc. What else do you think really sets StoneX Pro apart from other firms in this highly competitive business?

StoneX Group Inc. is a fast-growing Fortune 500 company, renowned across almost every asset class. I would say the biggest advantage we have is the economies of scale with respect to balance sheet and having regulated entities in almost every jurisdiction. For example, just in the US we have a broker-dealer, we have one of the only non-bank swap dealer entities, an FCM, and a Retail Forex Dealer. I think it’s becoming increasingly difficult for firms to function in just one of these areas, it’s simply not cost effective to do so. Another major advantage we have as a “StoneX” business is the geographical distribution of the firm, which allows us to very easily place teams on just about every continent. This is one of the core values we have as a company — being physically located near our clients, allowing us to truly navigate local markets while also leveraging the scale and efficiencies of a large organization.

StoneX Group by the numbers

How important is state-of-the-art technology in helping you to deliver and maintain the platforms and execution services you offer and what direct benefits are your clients getting from the investments you make in it and access you give them to it?

During the venture capital boom of the 2010’s there were a lot of large investments in FX technology. There were so many firms trying to earn a small piece of every transaction they could touch, and many of them were actually very innovative. However, eventually you end up with a market that’s flooded with tech vendors, and way too many hands in the cookie jar on each transaction and the consumer wasn’t seeing any reduction in costs. I think this peaked around 2018, and for our business we had to become laser focused on delivering the best trading environment without any marginal costs attached. Every investment we make in technology tends to be focused on price compression, allowing us to continually win on tighter pricing, while growing our own profitability on scale and increased volume

Earlier this year e-Forex reported on how demand for your FX trading services has been growing significantly recently. What factors have been influencing that?

Obviously, market volatility is a big factor, driven by both higher interest rates and geopolitical instability. We trade longer tenor forwards, options, as well as interest rate swaps, so I think we are even more impacted by the rate environment than your typical spot FX liquidity provider. At the same time, we’ve seen some very high-profile banks pull out of the FXPB space entirely, while others are pulling back due to a combination of regulations, capital usage, risk, and opportunity cost. This has certainly opened the door for us to increase our market share.

The number one pain point we’ve tried to address in the institutional FX space has been the complexity and inefficiencies of the bank FXPB model

In what ways has the FX market been evolving to create new opportunities for firms like StoneX Pro to come along and disrupt the status quo by offering more efficient access to institutional FX markets?

The number one pain point we’ve tried to address in the institutional FX space has been the complexity and inefficiencies of the bank FXPB model. It typically takes a year of legal contract negotiations to open an account with a bank, then you need to build all of your own trading infrastructure, procure trusted liquidity providers, map out all of your post-trade messaging, and continually manage limits and legal documents with all of your counterparties. Unless you are trading hundreds of yards of volume per year, this just doesn’t make sense. So we came in with the mindset that we already have all of these things and we’re really good at them, why don’t we bundle this into something our clients can plug into very quickly? That was the idea behind StoneX Pro, that you can literally open an account in a couple of weeks, connect to our high-performance infrastructure and full-service trading team, and trade all of the same products, including physical settlement and delivery. It’s easier, cheaper, and a better overall experience.

We’re proud that our efforts have been recognized across the industry

Each year we publish important regional spotlights on the fastest-growing global electronic FX trading hubs such as Singapore. How important are this and other Emerging Market regions to your business growth plans and why is StoneX Pro perfectly positioned to capture the opportunities they present?

Our Singapore FX desk is very important strategically. The growth potential in APAC is high and we look to the Singapore desk as a gateway to regional markets across Asia. Our Singapore team, which we continue to grow, has its finger on the pulse of local markets to identify specific regional opportunities where we can add value. Emerging markets have always been one of the cornerstones of StoneX across all asset classes. Our flexibility as a company as well as our risk appetite to support EMs give us the optimal positioning to service these markets. As a multi-asset broker, the reach of our global sales teams connects us directly with FX clients in emerging markets so in many cases, the market awareness of our brand is higher in these markets than in some more established ones.

In October we launched our new Institutional Digital Assets newsletter, IDAssets to cater for growing interest amongst our readers in this fast-developing market. What are your opinions about institutional engagement with Digital Assets and what needs to be done to encourage more of it?

The digital asset space is definitely a growth market for StoneX Pro. As crypto exchanges & custodians expand into new markets, this often increases the pressures on treasury teams to manage multiple currencies effectively. This has been particularly challenging as the banking sector pulls back due to its risk appetite for all things digital, which has created an opportunity for StoneX Pro to step in and provide the foreign exchange services needed by this industry. We have taken the approach that digital assets are a new emerging market, and like any other asset class we want to be there to partner with and support our clients with their needs. The lack of regulatory clarity, particularly in the US, is probably the biggest impediment to increased investment at this time, but we are still very much involved.

The StoneX Pro division continues to win awards. What’s the secret behind that?

It’s about continually focusing on our mission to provide a very simple and efficient way to access the full scope of FX products and services at a highly competitive price point. We’re proud that our efforts have been recognized across the industry and again, that’s a signpost to us that we’re providing significant value to our clients.

(From left to right) Sevinc Edikci, Qian Ying Goh, Gerard Melia, Edward Bolton, Eric Donovan, Thomas Friesleben, Fred Allatt, Andrea Michael.

You and your team have clearly been working extremely hard to build a thriving business. What achievements are you most proud about so far and what key objectives are you going to be focused on for 2024?

When we acquired Gain Capital in 2020, we had an opportunity to rethink who we wanted to be in the corporate and institutional FX world. We also thought about what the market really needed. We pulled together several fragmented teams to create a new, unified approach to our FX business which could be scaled across many client verticals and geographies. The people who made this happen are real experts, and while we are very proud of what we’ve accomplished over the last few years, I am even more excited about what lies ahead. We have created a better way to trade FX, and in 2024 we are going to make sure that message reaches new markets and new clients as we continue our rapid growth.

For further information about StoneX FX trading and liquidity solutions please visit: www.stonexpro.stonex.com/contact-us/