Louisa Kwok, head of prime of prime sales and products at ADS Securities London, explains to Profit & Loss deputy editor, Galen Stops, why there’s room for numerous different prime services models in the FX market.
With many of the traditional FX prime brokers (PBs) being increasingly selective about who they will offer their services to, this has created a gap in the market that some firms appear eager to fill. Subsequently, numerous prime services offerings are being touted to market participants under the banner of prime-of-prime.
but has the prime-of-prime space already become too crowded?
“I don’t think so,” says Kwok. “I think there’s a lot of different providers and so as a client it really depends on what you’re looking for. If you’re happy to trade on a company’s liquidity source, that’s’ one stripe of what’s available in the market as prime-of-prime. Or, if you have your own relationships that you want to manage, more like a traditional PB, I don’t think there’s as many of those true providers out there.”
However, Kwok noted that the nuances between the different models of prime services are not always well understood and that it is important for clients to make sure that they are comparing apples to apples when they are selecting prime service providers.
She adds that ADS Securities tried to follow a more traditional PB model, but also looks for other areas of the business where it can provide services to its clients, such as providing access to its own liquidity.
“There’s lots of different elements that you can play with,” says Kwok, adding that prime-of-primes generally have the advantage of possessing much more flexible technology than the traditional PBs.
The only challenge to the prime-of-prime model that Kwok foresees is the potential for bank PBs, who still provide them with credit, to continue withdrawing from the FX market.
“I think there are some large concerns there and it will be interesting to see what types of companies come out to play and what new offerings come out to fill that space,” says Kwok.
Watch the full interview here: