Broker takes baby steps back into crowded market

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By:
Paul Golden
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Marex Spectron is making a low-key return to the FX market, just over four years after it terminated its foreign-exchange business.

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Multi-asset brokerage house Marex Spectron sounded like it had had enough of the FX market in August 2014, stating that demand for foreign-exchange services had fallen and that this part of its business was not a notable revenue generator.

It began building its global FX business only two years earlier.

However, in October the firm launched a new FX platform, which includes a desktop and mobile app for FX and precious metal spot trading and market monitoring.

David Govett, Marex Spectron’s head of FX, describes the absence of foreign exchange from the firm’s service offering as a glaring omission. Despite being with the firm since 2011, he was not involved in the decision to withdraw from the market.

“Over recent years, I have done some internal hedging for the firm and the more we looked at expanding the precious metals and OTC business, a consensus emerged that if we kept it tight and offered something that was attractive to clients who were already trading, we could re-enter the FX business,” he says.

Govett is realistic about the task he faces.

“We haven’t looked at the FX brokerage market and thought ‘this is a market we absolutely have to get into and this is a wonderful time to get into it’, but our clients have been asking why they can’t trade currencies,” he says.

“There are probably too many brokers in the market already.”

'Individualistic'

He says the firm will offer a personalized service to clients whose business would not be sufficiently large to merit the same level of attention from the banks. Its target market includes commodity trading advisers and high net-worth individuals as well as smaller financial institutions, hedge funds and proprietary trading houses.

It expects to be particularly appealing to “individualistic” traders.

“If you are not a major corporate customer, a bank will handle your FX business through a generic sales desk,” observes Govett. “There are many clients who realise that their business is not large enough to carry on trading with the banks.

“We have seen a similar trend in precious metals, where we have picked up a lot of business from former bank clients.”


There are a lot of generic FX brokers out there looking for any business they can find. We want to provide a professional service from people who have been in the FX market for a long time 
 - David Govett, Marex Spectron

He says the firm has not set a strict minimum trade level for FX clients and that decisions on who to work with will depend on factors such as balance sheet and the amount of money they are willing to put up as margin.

“There is huge demand for leveraged trading, but we are not interested in that business,” adds Govett.

“If an individual or company approached us and said they wanted to day trade, we would be looking at a ticket size of around a million dollars. If they are doing that as an average ticket size, we accept that they will sometimes want to do smaller trades.”

Modest

The firm has set modest – and undisclosed – targets for its FX business, although its head of FX says that if the service proves attractive to existing clients, it might be rolled out to a wider audience next year with the addition of dedicated FX sales staff.

Marex Spectron white labels Currenex for FX spot transactions and earlier this year signed a deal with Minium Financial Technology providing access to a cloud-based risk-management platform that will allow the broker to consolidate a number of legacy systems.

“We can quote forwards, swaps, options and NDFs [non-deliverable forwards] on the desk but not yet on the platform, although we hope to roll out that functionality in time,” says Govett.

He accepts that the FX market is “over-brokered” and that it is difficult to stand out from the crowd, but says the firm can leverage the profile it has established in other markets and technology that it already uses to support its other business lines.

“There are a lot of generic FX brokers out there looking for any business they can find,” he concludes. “We want to provide a professional service from people who have been in the FX market for a long time.

“That will be our selling point, but we know it won’t be easy.”