All new prime of prime brokerage launches in London, headed by Integral’s Ramy Soliman. We speak to him in detail
“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
London is currently at the center of an explosion in the number of new prime brokerage services being established.
A timely dynamic indeed, as the provision of several types of institutional services to retail brokerages has coincided with a distinct difficulty in obtaining credit from Tier 1 banks by OTC derivatives firms across the world, thus London’s comprehensive and world-leading financial markets ecosystem becomes more advanced, more complex and more accommodating in order that the execution of trades by retail brokerages can maintain its best execution ethos.
Just this year, ADS Securities London launched its prime brokerage service, headed by industry veteran Marco Baggioli who has since been promoted to Executive Managing Director of Global Brokerage, as well as AFX Group, which opened a new institutional service called QuanticAM, led by Francois Nembrini, former Managing Director of FXCM’s institutional division FXCMPro, a position in which he spent 12 years.
Today, a new company enters the fold, founded and led by Ramy Soliman, who has spent the last year at Integral Development Corporation as VP Sales for the EMEA region, a tenure which was preceded by 5 years at Citi in eFX Margin Sales for the EMEA region, and 5 years at IG Group where he worked in Institutional Sales.
Mr. Soliman’s new prime brokerage is called Stater Global Markets, and is based in London.
Today, FinanceFeeds met with Mr. Soliman to take a close look at the ethos behind the foundation of the new firm.
What is the ethos behind the establishment of Stater Global Markets?
I saw a need for a fresh approach to Prime of Prime, concentrating on doing the basics properly and delivering a truly institutional product and service to a wider audience. With the team I have assembled and the product offering that we have, I believe we have the attributes and experience to deliver real value to our clients and the industry in general.
London has long been the prime brokerage capital of the world, however in the last year, several new firms have established. What has driven this and how does Stater Global Markets structure its business in terms of liquidity relationships with Tier 1 banks and provision to brokerages?
London has indeed been the PB and FX Capital of the world. I guess it was a consequence of the FX expertise being based here that the interlinked FX Prime Brokerage industry is also be based here. Whilst I can’t speak for other firms’ rationale for entering the space, post SNB, the retraction in the credit environment has led to opportunities to serve the space and address the evolving needs of a growing segment of sophisticated clients.
Stater Global Markets has a large number of direct liquidity relationships with top tier banks and non-bank providers. Our matched principal license means that clients wishing to trade on our liquidity will ultimately be back-to-back with a top institution. Our focus is on making sure that our clients’ objectives regarding their liquidity requirements are met.
A hedge fund or professional trader dealing in 5MN tickets will require a very different liquidity stream to a broker that is sending retail client flow.
The skillset for the Prime of Prime provider that wishes to offer liquidity is to have a good blend of liquidity providers and be able to customise it accordingly on a client by client basis (in conjunction with the LP’s) for an outcome where everyone benefits.
Our understanding is that it’s a seller’s market and the onus is as much on the counterparties needing to prove they’re good for the credit, rather than grandstanding by the Prime brokers. The smaller ones simply can’t work in the clip sizes they need, or otherwise restrict which prices a broker can get. How can the number of newcomers mitigate this?
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.
The solution is to make sure that your Prime of Prime provider has genuinely direct relationships with their liquidity providers facilitated by their Prime Broker.
Capital base is vital when providing liquidity to brokerages. If a prime brokerage has less capital than some of the clients have lodged at the brokerages which take liquidity from the prime brokerage, then the prime cannot make the client whole, therefore dissolving the prime. There are some firms with less than $20 million capital that are serving brokers with single clients on their books with more than that, which is ultimately a risky situation. What is your view on this?
I’m not here to tell others how to run their businesses. My view is that both capital and the business model should be major considerations when providing liquidity services. I believe that Prime of Prime Brokers are custodians of the credit extended to them by their Prime Broker. It’s the responsibility of a Prime of Prime Broker to manage their business model prudently and run a stable business – and that involves proper assessment of the clients they wish to provide liquidity to and the conditions imposed.
At Citi, I had excellent relationships with a number of well-run brokerages (both those that externalised 100% and those that ran risk models). These entities were well capitalised and pro-active on their risk management – good examples of efficient operators in the retail space. Ultimately, whatever approach you take to servicing clients in this space, as long as you are prudent and look to mitigate risk, this usually ends up with a sustainable long term business model.
How does Stater Global Markets approach liquidity aggregation? Do you name all providers to the broker, or have specific relationships with one or two non-bank and bank liquidity providers, routing orders to one at a time?
We have a number of direct relationships with primary providers in our liquidity pool. We do not provide names to customers. Aggregation is clean where all the appropriate liquidity for the client is aggregated and the best LP will win the ticket.
In these times of restricted credit by banks to OTC counterparties, how can Stater Global Markets create an efficient trading environment for brokerages whilst navigating the reluctance by banks to offer credit?
Stater Global Markets has an advantage in the strong liquidity pool that we have. By having a number of direct liquidity relationships, we believe that Stater Global Markets has a strong differentiator over those that may have had lines limited to a smaller number of direct counterparty relationships.
How do you view the innovation of the prime brokerage sector in the coming year to take into account competition at non-bank level taking similar liquidity from the same banks?
I’m very keen to see how this develops. I think that the non-bank market makers are very interesting and that there are quite a few that are making prices and running risk in an inventory style way similar to the bank LP’s. These firms are adding genuine liquidity to the market and should be encouraged.
In terms of market makers who are non-banks and are essentially recycling bank liquidity rather than forming their price independently and managing risk accordingly, I think they will find it more difficult to operate in the space going forward.
In terms of innovation, the technology exists to service a new segment of smaller liquidity makers – sophisticated clients that wish to make pricing into a market but don’t necessarily have the capital base to have direct access through a Prime Broker. There is a great opportunity for focused Prime of Prime Brokers like Stater Global Markets to cater for this growing audience.