By ignoring the retail brokers that are Prime of Primes purely for the purpose of marketing themselves, we find that there are only a few remaining who are offering real Prime of Prime services Natallia Hunik, Global Head of Sales, Advanced Markets Fortex
Prime of Prime in FX has undergone a lot of changes in the past few years, yet it remains one of the most highly demanded services in todays marketplace. Prime of Primes role is to extend interbank market access to clients who do not have access to credit.
To put it another way, it helps create direct market access for those clients who do not meet the stringent collateral and credit criteria thats needed in order for them to establish their own, direct, prime broker relationship with a bank. The main value that a real Prime of Prime delivers is non-latent access to institutional trading, in a secure and regulated environment.
Currently, there are a number of firms appearing in the market with the word Prime in their name, but beware, all is not as it seems. Anyone can use the word Prime and promise that theyre a real Prime of Prime but in reality very few are, and even fewer can actually deliver on those promises.
Just look at the recent STP phenomena where countless retail brokers claimed that they offered STP accounts with extremely low spreads, high leverage and deposit bonuses, which we all know is a complete misnomer. A similar pattern is happening with Prime of Prime where retail brokers, without a Tier 1 bank prime broker relationship, are creating Prime brands in an attempt to capture some of the more sophisticated clients.
By ignoring the retail brokers that are Prime of Primes purely for the purpose of marketing themselves, we find that there are only a few remaining who are offering real Prime of Prime services. Among those who actually have access to Tier 1 Prime Brokers, there are even fewer actually sending trades to the market; instead they are internalizing their flow.
it is evident that, due to the mixed messages coming from all sides, there is a general lack of understanding about Prime of Prime; what it is supposed to accomplish and when you may need one.
Essentially, here is the formula Ive outlined for the truly successful prime of prime:
Real Prime of Prime = B2B + PB + Reliable Technology + STP
1) Ideally, the prime of prime is B2B-only, to avoid any conflict of interest between the broker and its prime of prime liquidity provider.
2) A real Prime of Prime needs to have a Tier 1 Prime Brokerage relationship (example: Advanced Markets is primed by UBS AG)
3) Reliable technology Is the vendor dependent on 3rd party technology? If so, which one? (You may want to conduct due diligence on the vendor separately). Do they have their own technology? As a client, some of the key things that you should be looking for from the technology are stability, scalability and robustness.
4) A real Prime of Prime must be STP-only (straight-through processing) indicating that they will be actually sending your trades directly to the market and not managing all, or some, of the risk in-house.(the whole point of entering into a prime of prime relationship).
Why does a retail FX broker have a need for a prime of prime?
What are brokers and asset managers looking for in their Prime of Prime partners offering?
Ideally, clients (retail FX brokers, asset managers, family offices) should be looking for a prime of prime that can address their needs and solve their problems, but also add value and help scale and grow their business.
Before starting a relationship with a prime of prime/liquidity provider, the broker should be looking for a reliable, reputable, licensed partner in order to, first, ensure the safety of clients money. As we all know, history is the best predictor of the future, so it is imperative that the company has a clean track record and an impeccable reputation.
Quality of fills, execution, price feed stability and overall trading conditions are on the list of priorities for FX businesses when selecting a PoP partner.
Often times, clients make the mistake of evaluating an offering based on spreads and commissions and end up being misled into believing that they can get fills at the advertised prices. Many quasi prime of primes are offering tight spreads that turn out to be only applicable for tiny trade sizes and often requotes, rejects and slippage make the total overall spread cost significantly higher than advertised.
In conclusion, a knowledgeable prime of prime will engage in an educational conversation, by demonstrating use cases on how the offering is structured, its benefits, infrastructure specifics and delivery methods.
The professional team at the prime of prime brokerage will not pressure the prospect, or try to lure them in using price dumping or heavy discounts, but will instead listen to them and help tailor a solution to their issues and needs.
advanced markets,forex,fortex,natallia hunik,prime brokerage
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1) So are retail traders SOL when it comes to finding a broker who they can be assured will not trade against them? or is there a way to check the retail broker out before sending your deposit?
2) If a broker has true Prime or Prime of Prime relationship, would there be any reason to hide this?
3) Should the client have direct access to post trade reporting? If not, what is the maximum time between requesting a trade report for a particular ticket and actually receiving the report?
What kind of details should the report contain?
Do you have a sample post-trade report? [can break up the link if Disqus does not allow urls]
Are you implying that some Prime of Primes are offering liquidity that is perceived to be based off direct relationships but turns out to be indirectly sourced? If so, there is a limitation on the capacity of liquidity that the provider can genuinely service without a deterioration in the pricing and execution Ramy Soliman, CEO, Stater Global Markets
Industry News,Institutional FX,Week in Review
Double standards: Standard Chartered insists on massive capital and liquidity charges, yet fails to meet its own required capital stipulations
Standard Chartered divests from retail banking even further and concentrates on Tier 1 electronic trading, the firm continues to stipulate charges for having to cover margins if there is a drop, also has capital charges in place on its PB contract, yet does not meet the capital requirements stated by the Bank of England.
Inside View,Institutional FX,My FX Week,Retail FX
Brokers need to be large, well-capitalized and do a lot of volume in order to be held in high regard by their PB says Gavin White of Invast
Ashley Jessen is one of the FX industrys urbane product and branding executives. He has founded and operated companies which
Institutional clients, and their retail clients in the case of retail brokers, can end up with a far better deal if they can access liquidity directly from their prime of prime but still have the ability to take whichever direct price feed they prefer James Watson, CEO, ADS Securities, London.
FinanceFeeds dissects the entire situation and speaks to the banks and the traders concerned.
It is very important for brokerages to look in great detail at how a prime of prime is structured and how its relationships with brokers, banks and ECNs is vital knowledge to ensure correct execution. Two highly experienced Prime of Prime specialists explain all.
A prime of prime cannot decide whether to A book or B book, or interfere with the way liquidity is distributed, otherwise it becomes a broker, or market maker Ramy Soliman, CEO, Stater Global Markets
Most certainly, as the first day of the fifth iFXEXPO International here in Limassol, Cyprus progresses, the continued industry discussion
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