Prime brokerage services for banks
Institutional trading platforms (sometimes called B2B trading platforms) must meet standards for security, functionality, robustness, and other factors that are far greater than retail trading platforms. We can break down the requirements of an institutional trading platform into several major areas.
First, it must offer Direct Market Access (DMA) to all major markets, including securities, derivatives, foreign exchange and cryptocurrencies. Direct Market Access gives investors access to the exchange order book on which an instrument is traded. It means that the end client can control all aspects of the order’s execution rather than routing the order through the broker’s own order management system, as is usual in retail environments.
A B2B trading solution must support multi-currency accounts. Banks and other institutional investors with cross-border business will need to maintain numerous sub-accounts denominated in different base currencies. They will routinely wish to maintain cash positions relating to their natural currency exposure, derived from both their normal lending and borrowing and their portfolio investments.
An institutional broker must be able to offer transparent and competitive rates, including brokerage fees, swap rates, interest rates on both leverage and cash held, and borrow rates on shares sold short.
An institutional prime broker will offer a high-quality trading terminal that is powerful and robust since the platform crashing or freezing at the wrong time could be disastrous. In a fast-moving market environment, confusion or lack of clarity could prove expensive, and as a result, the terminal must also have an intuitive user interface and good documentation. If anything does go wrong, support is a priority, and an institutional broker should be able to offer 24/7 enterprise-quality support if required.
A high-quality institutional investment platform for corporates must provide an Application Programming Interface (API) that enables fast, high-volume market access using algorithms. A robust and stable trading API has become mandatory for institutional traders since most trading in the major financial markets is now conducted programmatically. A mature, complete API should be compliant with the Financial Information Exchange (FIX) standard for low latency, high throughput transfer of market orders and financial information. The trading API must provide a secure login and validation process and allow the user to access the following programmatically:
- account data (such as the cash balance and existing positions)
- details of working orders
- price quotes
- trade confirmations
- prior trade data (including associated profit and loss)
- market information (such as instrument types, trading hours and order types accepted)
The trading API may also include other features, such as market event calendars or the ability to monitor watchlists of securities. Such an API allows institutions to build fully-functional automated trading systems.
Large institutional investors have reporting requirements far beyond the average retail investor. These must comply with prevailing regulatory standards, and trades often need to be attributed and settled across several sub-accounts. Furthermore, the institutional investor will conduct complex and extensive risk calculations based on the reporting provided by the broker, so accuracy and granularity are paramount considerations.
Sophisticated institutions often trade in liquid markets from dozens of countries around the world. A B2B trading solution must have solid financial standing and be licensed and accredited as an authorised market participant by regulators and exchanges in any country it operates in. To be credible to institutional counterparties, an institutional broker must, at minimum:
- Use recognised custodians to ensure its assets are kept securely
- Have an auditable process to demonstrate asset segregation for its institutional clients
- Be able to explain how counterparty risk is managed
We’ll examine five prominent institutional prime brokerage providers and assess how their services meet the standards described above.
EXANTE is the standout performer in institutional prime brokerage, with a fast setup and onboarding process, mature regulatory compliance and granular reporting.
EXANTE was founded in 2011. It has over 500 employees across 10 offices in Europe and Asia, serving clients in over 100 countries, with $1.6bn in assets under management. EXANTE offers a fast, intuitive and secure trading platform that allows clients to trade from a single multi-currency account on any device. Its clients can trade over 600,000 financial products globally, receiving direct market access to over 50 exchanges, including securities, funds, foreign exchange, metals, futures and options.
The company prides itself on using its market-leading technology to offer an exceptional client experience. To ensure that they can route orders optimally and offer the fastest execution to their clients, EXANTE built a network of 1,100 servers globally. EXANTE’s B2B trading platform is built for professionals, offering the same excellent experience from any platform, desktop (Windows, Mac or Linux) or smartphone (iOS or Android). To offer clients a truly first-rate service, EXANTE has both HTTP and FIX APIs, as well as Excel integrations. The company offers 24/7 client support in nine languages.
EXANTE’s clients include banks, wealth managers and family offices. The company counts some of the world’s largest financial institutions among its partners, including HSBC, Bank of China and ING Group.
EXANTE’s excellent performance in the space has been recognised numerous times, most recently when it won Best Multi-Asset Broker at the London Summit Awards in 2022. The company previously won Best Digital Broker in 2020 at the Digital Investment Company Awards, and Best Trading Platform 2019 from the Global Banking and Finance Review.
IB is a venerable name in the institutional brokerage industry. The company was founded in 1978. It offers access to global securities, Forex, funds, and derivatives from a single investment platform. IB allows its clients to invest in about 150 markets globally and 26 different base currencies. Their Trader Workstation is certainly powerful, but it can be clunky and unintuitive.
Saxo offers access to over 40,000 financial instruments across all major asset classes, including securities and Forex and 26 account base currencies. Saxo is regulated in most major markets and works with over 600 institutional partners, including Generali, Standard Bank and Old Mutual. Saxo offers a suite of trading APIs and integrations with third-party tools.
Fee and commission rates are variable, being quite high on bonds, options and equity swaps but competitive on cash equities and Forex trading. While its trading platform is impressive and fully featured, customer support can respond slowly. While the application process is slick, onboarding can also be difficult, with a slower verification process, high minimum deposits and limited deposit methods.
Moventum is a Luxembourg-based financial group founded in 2000 that serves over 400 investment companies in 120 countries from five offices worldwide. Moventum has been part of the larger ProService Finteco group, a fintech and fund services provider, since 2021. Moventum is relatively small, conducting around 1m transactions per year.
The company also has a fully digital onboarding process, and MoventumOffice, their investment platform, enables access to more than 10,000 funds and securities and provides detailed reporting tools and support. It also allows professionals to open custody accounts for clients, place orders and view news or research, all from one platform.
5. GTN Group
GTN Group is a Dubai-based B2B fintech company which provides market data and brokerage services for B2B and B2B2C clients. GTN operates from six offices around the globe and offers access to 82 securities, foreign exchange and derivatives markets in 78 countries. It is still quite immature, with 200 clients and 1.4 million orders worth $79 billion processed in 2021.
GTN offers a single investment platform for trading across eight asset classes, with end-to-end HTTP and FIX APIs. GTN also offers both web and mobile trading terminals that integrate news, alerts, research, securities trading, FX trading, account data and online statements. GTN also offers an institutional-quality dealer terminal with advanced order management and an admin terminal which combines all core back office and operations functionality.
The company seems to be targeting the smaller end of the institutional market at this point, with low minimum investments.