FROM LITTLE ACORNS…
Muamar Behnam, Head of Global Sales HQ at Swissquote Bank spoke to Best Execution about their operations and development from a regional to global player.
Can you please tell briefly about your company and its offerings?
Swissquote Bank is more than an FX Broker. Our online bank was founded in the late 90s, and started to offer online trading on various exchanges. We also went public early, our IPO was done in May 2000, and since all our financial information is accessible to the public, they can see we are solidly capitalised. The fact that we do not pose any counterparty risk is one of our major selling points with institutional partners. On the traditional trading (stocks, funds, bonds, derivatives, etc…) side of the business we have the most comprehensive online offerings for banks and brokers with more than 2.8 million tradable instruments across over 30 markets worldwide.
We came quite late into FX. It wasn’t until 2008 that we entered this market. We then acquired two of our main competitors in Switzerland – ACM (Advanced Currency Markets) in 2010 and MIG Bank in 2013. The acquisitions completely changed the profile in that we went from being very Swiss-centric to a much more globalised bank, with regulated entities in London, Malta, Dubai and Hong Kong. Our client base now is 90% international on the FX side.
How have the FX markets changed over the past year in light of regulation in Europe and geo-political events?
Regarding geo-political events, the uncertainty around Brexit has definitely created good levels of volatility that has helped us generate increased volumes. We think that 2018 will probably be better than 2017 on that aspect. As to new regulations, specifically ESMA leverage limits, our London entity got an initial hit by the 1:30 figure, but they are now almost back to their previous levels.
Other entities (Switzerland, Dubai and Hong Kong) were not impacted as they don’t deal with business from EU territories. The London office is important to Swissquote and will continue whatever the outcome of the Brexit negotiations (deal/no-deal, etc…).
What were the drivers behind your acquisition of Internaxx and how do you plan to develop the business?
We have strongly developed our FX business outside of Switzerland, but not much was done on the traditional trading business in recent years. Our management identified Internaxx as an entity with similar DNA as ours and therefore decided to acquire the Luxembourg-based broker. It will be our entry door to address EU business and more.
How have you used technology and innovation to improve your execution and service?
Technology and innovation are part of our DNA. Our founders, Paolo Buzzi and Marc Burki, are both fiercely technology driven and graduates of the Polytechnical Institute of Lausanne. Therefore, technology is at the heart of everything we do at Swissquote. Most of our tools and client platforms have been developed internally. Out of the 600 plus headcount at Swissquote Bank worldwide, over 60% are engineers, developers and IT people. This is quite an unusual ratio for a bank but that is also what sets us apart in the Swiss banking landscape.
What difference will the move from Gland to LD4 in London make?
In a business where every millisecond can be subject to debate, you can easily imagine that relocating our FX infrastructure closer to our liquidity providers is a necessary and fundamental move. The project which has lasted a year is now being finalised. As we did a progressive migration, we have seen our execution improve step-by-step over the past year and we should be at full speed in early 2019.
How are you building and managing sustainable relationships with a pool of liquidity providers (LPs)?
It’s a job that our Head of FX Dealing, Ryan Nettles has been doing for the past 10 years. Not a single day passes without him or his team being in contact with our LPs (liquidity providers). And I must say the quality and depth of our liquidity has been improving quite strongly over the past years as we have become a more important player in this industry. Recent addition of non-bank liquidity has also allowed Ryan and his team to enhance further our offering.
What does your retail expertise bring to the institutional marketplace?
Our institutional business has started to pick up these past two years. It was almost non-existent and static before the acquisition of MIG Bank. It really took off seriously in 2016 but it took us time to find the right external service providers, develop the right tools for our institutional partners and to put in place a solid risk strategy. So it was more about internal organisation than our retail expertise that helped us strengthen this side of the business. And of course, once all was ready we had to identify the right relationship managers and sales people to deal with this specific profile of client.
What are the biggest challenges when it comes to managing multiple liquidity flows?
The main challenge is to customise the flows (both layers and depth) in order to customise and offer the best (the closest to tailor-made liquidity) to all our customers. We have now totally separated the teams dealing with the retail flow and institutional flow. We also have two teams managing the flows with LPs and there are specialists on both sides. We restructured the business and the situation is much healthier now than it was before.