prime brokerage
P&L Report Card This remains a strange area in many ways because while we constantly hear about clients being told they are not big enough for the prime broker to retain them, and of PBs cutting the client tail, just about every PB out there continues to affirm their commitment to building the business! Clearly […]
New regulations will increase the cost of FX prime brokerage (FXPBs) services and all market participants – including executing brokers (EBs) – will have to share these costs, says a new report from Citi.The report, Collateral Damage? How Uncleared Margin Rules Will Revolutionise the FXPB Business Model, argues that FXPB is entering a “new market paradigm” driven by upcoming regulatory requirements that will increase both the value proposition and the cost of the services that they provide.The Uncleared Margin Rules (UMR) alluded to in the title of the report require market participants to post and segregate initial margin (IM) for derivatives transactions, including FX forwards, swaps and options, that are traded bilaterally.
Capitolis has announced that Citi and HSBC are the first FX prime brokers to go live on its novation service.The two banks were live in December 2018 and contributed to bringing the service to market alongside Capitolis. The service, called Capitolis Novation, is a technology platform that automates manual workflows in both FX prime broking and bilateral trading, working collaboratively to provide capital efficiencies for the FX market. The service aims to help reduce overall balance sheet notional and risk exposures that banks currently employ to meet their regulatory capital requirements.
Louisa Kwok has joined State Street Global Link in London as product manager in its trade services business. Confirming her appointment, a spokesperson for the bank says she reports to Kate Lowe, global head of trade services.
Kwok joins after a one year stint at JP Morgan, where she was executive director, product delivery, for the bank’s investment middle office services unit in its Custody & Fund Services business. This was her second term at the bank, having worked there from 2002 to 2009.
ADM Investor Services (ADMIS) will be providing FX prime brokerage, execution and settlement services through oneZero Financial Systems’ EcoSystem.
This expansion of the FX services and distribution network will make ADMIS’s professional and institutional offerings available to a broader set of market participants.
“Having ADMIS join our EcoSystem greatly enhances the current offerings available to our users,” says Andrew Ralich, CEO of oneZero. “ADMIS is an established, well-capitalised firm with global reach. Their participation in our EcoSystem gives our customers new access to a counterparty that is highly regarded across the derivatives industry.”
OTC Exchange Network (OTCXN), which uses proprietary blockchain technology in a bid to eliminate trading counterparty and settlement risk on their trading network, has acquired Ogg Trading, a provider of FX trading technology.
Through this deal, which closed on June 18, 2018, OTCXN will acquire all Ogg Trading’s technology including the dark pool that it previously ran in partnership with Bloomberg. The dark pool is a complete matching engine technology stack. The plan is to add market data publishing to this platform in order to create a regular central limit order book (CLOB) with a lit pool of liquidity. Ogg Trading also has a liquidity aggregator and smart order router (SOR) system that can be deployed to run a quote driven market place.
The announcement by BNY Mellon this week that it is launching an FX prime brokerage (FXPB) service is interesting for a couple of reasons.
Superficially, it bucks a trend that has developed in recent years of banks scaling back, or even shutting down, their FXPB businesses. However, Profit & Loss already argued in a special report looking at prime services published in Q3 2017, that this trend was beginning to reverse itself.
So perhaps more significant is that it indicates that the barriers to entry in FXPB have been lowered as the cost of technology and infrastructure has both decreased and become more available.
Profit & Loss talks to Zeus Shaikh, founder of Bear Shaikh, about the legal challenges associated with FX prime brokerage and how firms should be approaching blockchain technology.
Profit & Loss: You now run a “legal consulting firm”. What is that and how does it differ from a typical law firm?
Zeus Shaikh: At Bear Shaikh we’re looking to disrupt the way that financial services firms are serviced. Although there is some overlap between what we and law firms do, there are services that I offer that a law firm does not.
Galen Stops speaks to market sources about the feasibility of splitting prime services into credit provision and trade processing.
Capitolis is the latest venture headed by Gil Mandelzis, the former EBS BrokerTec and Traiana CEO. Mandelzis co-founded the company along with his former Icap and Traiana colleague, Igor Teleshevsky, and former Thomson Reuters CEO, Tom Glocer in New York earlier this year. Mandelzis operates as CEO of the firm, Teleshevsky is VP of R&D and Glocer is listed as an executive chairman.
Numerous firms have spotted an opportunity to capitalise on the current credit constraints in the FX market by offering a “prime-of-prime” solution. But what are the different models being operated by these firms and what should market participants be looking at in order to spot the real deal? Galen Stops reports.
It’s no secret that over the past couple of years, some of the biggest FX prime brokers (FXPBs) have been off-boarding
existing clients, while simultaneously raising the bar in terms of the capital requirements for new clients.
But while the willingness of these banks to extend credit has reduced, the need for market participants to access it in order
to trade the FX market has not, as noted in the introduction to this special report.
