Q: 2021 was a record year for Swissquote in terms of its financial performance. How did the FX business perform and what was that due to?
A key milestone for this year was the integration of new venues to enhance our deliverable FX offering for our regional bank clients.
Mohamed Hajibe: 2021 was a record year with operating revenues increasing by 49 percent year-on-year to CHF480m. The FX business is an important part of it with electronic FX income accounting for 25% of global revenues at CHF121m. This is mainly due to the improvement of our internal models and the expansion of our FX offering across new venues rather than market volatility which decreased compared to 2020.
Q: Across this year, what have been some of the main FX market trends, and key developments in Swissquote’s FX business?
Maxime Mordelet: On the execution front, we have seen more transparency from traditional banking liquidity providers with reduced hold time for trades subject to last look. Nevertheless, this can still be improved to give more transparency to clients. There also is a desire from FX makers to save on execution costs in developing joint utilities, such as Spotstream, giving a free of charge execution for takers and a flat fee for makers.
Hajibe: A key milestone for this year was the integration of new venues to enhance our deliverable FX offering for our regional bank clients. We want to make a strong push on that front to improve the liquidity we offer to tier two and smaller banks as it appears that the pricing they are getting from competitors is not tailored.
Q: In the remainder of this year and moving into 2023, what is the overarching strategy of the FX business?
Mordelet: We plan to price more venues including FXGO and TradingScreen and also to expand our product offering across existing venues. We are already pricing spot for major venues like 360T, FXall or Integral but are planning to focus on derivatives in the coming months. We wish to take market shares in FXALL with full capacities now pricing the off-venue and MTF. On the precious metals front, we have seen increasing demand from banks and refiners for physical gold and are working to improve our making capacities in the different loco denominations.
We are very agile in the way we customise liquidity for individual clients.
Q: Are there specific areas of the business, or client types, where you will increase focus and investment?
Hajibe: The balance sheet of the bank has grown over the past few years, and we want to leverage that in offering credit facilities to our clients. For that purpose, we are becoming a third-party CLS participant, which will ease settlement of larger executions with institutional clients. We wish to serve regional and smaller banks as well as large corporates having real FX and rate exposures. This is the case in Europe, where we have an important client base, but we also are active in other regions such as the Middle East.
Q: For clients, what is different or distinctive about Swissquote’s FX offering compared to other banks?
Mordelet: We have more flexibility than a tier one bank typically using nine to 10 family pricing groups. We are very agile in the way we customise liquidity for individual clients. We also have built very strong relationships in niche markets, meaning we constantly price tight for majors but can also show specific skews in emerging pairs. Another difference with traditional banking is our capacity to offer competitive pricing for retail products, such as CFDs on stocks and cryptos, which smaller banks and brokers are asking for.