Why we were voted the Best prime-of-prime house 2020 in the FX Markets Best Banks survey
Head of FX Prime Brokerage, Saxo Bank
Summary: Amid a year of uncertainty brought about by Covid-19, many professional traders turned to Saxo Bank - and its more than 40,000 financial instruments - to take advantage of the breadth of its offering.
The surge in volatility that took hold of financial markets in 2020 on the back of uncertainty in the fallout from the rapid spread of Covid-19 worldwide sparked a trading frenzy in many asset classes. This left many professional traders scrambling for a broker that offered an attractive set of instruments to trade and a good selection of venues on which to trade.
With more than 40,000 financial instruments at their disposal, many professional traders flocked to Saxo Bank during the course of the year to take advantage of the breadth of its offering.
“There was a big influx of clients in the first half of the year, due obviously to the increase in volatility,” says Peter Plester, head of FX prime brokerage at Saxo Bank. “There was a further increase in the second half because one of our biggest competitors offboarded clients in certain jurisdictions.”
“There are not that many places they can go to that offer the breadth of instruments and access to exchanges that Saxo offers,” he says. “As their original broker and Saxo are pretty much at the top of the tree in terms of market access, number of instruments and exchanges offered. So, we were the natural next choice.”
With connectivity to seven of the largest electronic communication networks, few of Saxo’s competitors are able to match the extent of direct market access it provides its clients, nor access to 25 of the largest bank and non-bank liquidity providers in the market.
While the fallout from the recalibration of the prime brokerage space when Citi offboarded a selection of small and mediumsised institutions in late 2018 and early 2019 has largely subsided, many smaller hedge funds and asset managers continue to transition towards a prime-of-prime (PoP) broker such as Saxo because they are comfortable with its financial soundness, and feel they might be better served there than at a traditional big bank prime broker.
“We’ve established ourselves firmly as one of the biggest and most highly capitalised providers in our sphere,” says Plester. “Having increased our size substantially over the past few years, larger clients are a lot more comfortable choosing Saxo as their PoP because, if they have $100 million in assets, they want to make sure their PoP has the balance sheet and capital to handle that.”
Saxo Bank, which was voted the best prime-of-prime house at the FX Markets 2020 Best Bank Awards for the fourth time since the inauguration of the award in 2016, has grown tremendously since its inception in 1992 through a number of strategic partnerships and acquisitions. The latest of these is the purchase of Dutch online brokerage BinckBank in 2019, which brought Saxo’s total assets to more than €50 billion.
“Size is obviously important,” Plester says. “Firms might still be too small for a big bank prime broker and far too large for the smaller PoPs.”
“Who would not want to be a bigger client at a PoP like Saxo rather than a small client at a bigger institution? I think most would rather be an important client somewhere than a small and fairly insignificant client somewhere else.”
While the acquisition of BinckBank has broadened its client base and bolstered its balance sheet, the ongoing merger is extending Saxo’s foray into new financial instruments such as turbos, but also marks its entry into the more traditional investment market.
Established in 2000, BinckBank provides a large selection of investment services through its online platform and its operational branches in the Netherlands, Belgium, France and Italy, and is now being brought under the Saxo brand.
“The next big move for us going forward will be the investor space,” explains Plester. “We’re beginning to concentrate on products for investors, as well as those for traders, which has been a traditional market for us.”
“Investing is different in that clients aren’t looking at leverage for short-term gain, but for longer-term investment income and long-term growth. Because we have access to so many markets across so many exchanges and so many instruments, this definitely lends itself well to giving clients a greater choice of where they want to put their money.”