Swiss engineering, FX-style

Best Execution spoke with Mohamed Hajibe, Head of Institutional Sales at Swissquote Bank about their trajectory from retail to institutional eFX broker.

How long has Swissquote Bank been offering retail clients and retail brokers marginal eForex solutions?
Our first retail business offering started with MT servers in 2006. We then increased our daily volumes through the acquisition of well-developed firms like ACM in 2010 (at the time ACM [Advanced Currency Markets] was one of Europe’s largest brokerages), and MIG Bank in 2013.

What triggered your move into the institutional market, and what edge did your retail experience bring?
In the past the Swiss institutional market was only covered by traditional banks like UBS and Credit Suisse, but we had the desire to bring something different in the electronic world.

We had successfully passed the first test of developing our pricing engine for retail business, so it was natural for us to move into the institutional world as soon as we felt ready.

There are important synergies between the retail and institutional worlds and by leveraging these our monetisation has been improving year on year.

How has this side of the business developed, and how is it different from your competitors?
The institutional business is where we have experienced our most important growth, and this is borne out by the fact that we now rank just behind the tier one Swiss Banks for eFX. The edge we have compared to the competition is that firstly we offer 24-hour streaming liquidity in all the traditional FX platforms (e.g. FXALL, 360T, NT Pro and Integral), but even more important are the relationships that we have built with new eFX technology providers.

We can provide FX liquidity to any client using a prime broker or through a bilateral relationship because we can offer credit lines. We can offer our eFX platforms, provide liquidity through multilateral trading facilities (MTFs) or directly connect to our client’s API. In parallel, we can offer liquidity to more traditional asset classes such as equities, bonds, or futures and options. Cross margin-wise, it gives our clients a lot of flexibility.

Can you explain your pricing model?
The idea for us is to find synergies between our large retail inventory and our institutional business, meaning that we internalise most inflow for major currency pairs. By doing so we reduce our execution costs as well as diluting the market impact for large professional client orders. We also have built strong relationships with the best bank and non-bank providers to create a deeper liquidity offering in most illiquid assets.

After five years in the institutional market, what stage is your business at?
We started with eFX spot and metals, where we have proven our concept and now we feel it is the right time to increase our offering, by launching forwards and swaps in 360T, FXALL and Integral, as well as commodities and cryptos. The profile of our clients is also changing. We used predominantly to serve retail brokers but we are now adding more corporates, regional banks and asset managers.

At the same time, the sales team is being reinforced with new hires, and last year we engaged Maxime Mordelet (formerly an eFX & rates trader at Crédit Agricole CIB in New York) to develop new products and reinforce our liquidity offering.

You mentioned the development of bilateral business – what does this entail?
We are a Swiss bank regulated by FINMA with equity of CHF 440m, which gives us room to grant credit lines to our clients, after compliance and key figures review. On top of that, we have ISDA and CSA agreements in place and are finalising our CLS set-up to trade with large European Institutions. Another focus of ours, over the last 6 months, has been the development of our physical FX offering with our correspondent banks. Our clients now have access to top-notch liquidity with all the post-trade settlement services behind it.

What is your strategy going forward?
Our aim is to serve regional banks and mid-size corporates who have real FX needs and exposures. The idea is to offer a tailor-made liquidity service with 24 hour support.

Swissquote’s institutional business has been growing at a very fast pace but we still have a lot of flexibility compared to traditional banks to adjust and work on a case-by-case basis.

What do you foresee as the biggest challenges, as well as the opportunities, in the future?
Complying with regulations is very important to gain partner and consumer trust, but it does create challenges. The regulations are becoming more and more onerous, but to be successful long-term one must be fully compliant.

In my opinion, investing in technology is also crucial to maintain competitiveness and improve customer experience. It is both a challenge and an opportunity, and we are incredibly lucky at Swissquote Bank because our founders were first of all engineers before becoming bankers. Technology is therefore part of our DNA.

Finally, attracting and retaining the right talent to support the company’s future development is also key.

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