LeapRate Exclusive Interview… One of the more interesting companies to step up lately in the FX liquidity and Prime Broker services business is IS Prime. From acquiring the assets of risk management services provider ThinkLiquidity to tripling its Revenues to more than $21 million last year to adding people (especially in the Far East), IS Prime seems to be on a roll.
What are IS Prime’s priorities today?
What kind of clients is IS Prime working with?
Does IS Prime see a migration among brokers from MT4 to MT5?
What are the biggest issues it is facing, especially in the Far East?
We’re pleased to speak today with IS Prime’s Head of Asia Will Robbins to discuss these issues and more. Here is what he had to say.
LR: Hi Will, and thanks for joining us today. How has IS Prime Hong Kong developed over the last year and how has being part of the ISAM Capital Markets group impacted the business?
Will Robbins, IS Prime
Will: In the last 12 months since opening the office in Hong Kong we have focused on building our sales and coverage teams and working towards obtaining our SFC Type 3 licence. A key focus has also been on supporting our UK liquidity and US risk businesses and growing our client base in the region.
Being part of ISAM Capital Markets – which also includes IS Prime in the UK and IS Risk Analytics in the US – enables us to engage prospective clients from multiple angles including liquidity, bridge and risk management services.
IS Prime provides us with the ability to access Tier 1 street side liquidity whereas IS Risk Analytics enhances our offering with comprehensive bridging and risk management solutions. We are confident that clients will not find a more comprehensive suite of solutions with any of our peers.
We also benefit significantly from the financial backing as well as the highly sophisticated technology and quantitative expertise that sits in the group’s USD 4bn AUM hedge fund ISAM, enabling much deeper analysis of trading flow.
LR: What services do you offer from IS Prime Hong Kong?
Will: At this stage, we are applying for our SFC Type 3 licence so we are unable to provide leveraged FX services from Hong Kong. As such, we currently provide support services “in the time zone” to the existing client base of the Group, as well as engage clients and prospects with regards to our technology offerings (bridge and risk).
LR: What type of clients are you currently working with and where are they typically based?
Will: Our typical Group clients include retail brokers, asset managers and hedge funds. Most of our clients tend to be “Prime” clients and typically include retail brokers who engage with us on a Prime of Prime basis. However, with the increasing growth in the institutional market, we are focusing more and more on “Agency” business.
For the most part, retail brokers in the region focus their marketing efforts on China (although there is increasingly more marketing budget being spent in SE Asia). Where those broker clients are “based,” however, is where it gets interesting, as jurisdictions vary enormously in terms of stability, governance and the reliability of the regulatory framework (if any).
We work with well-established brokers that are registered and regulated in Tier 1 jurisdictions such as the UK and Australia, all the way down to start-up brokers that are registered in more accommodating jurisdictions such as Vanuatu and Saint Vincent & Grenadines. We can partner with brokers in all geographies, provided they meet our stringent KYC/AML compliance checks.
LR: How have you seen the Asian market develop since setting up in HK?
Will: The market is becoming more mature and educated by the day. Reputation of brokers is becoming more important, with retail clients increasingly looking to trade with brokers that are ideally regulated, STP, and deemed to be “reputable” (meaning that the retail client will get their money back when they request it!). High leverage, while still important, is not the main draw anymore.
As such, we are seeing brokers increasingly look for higher quality liquidity, as end clients are becoming less willing to accept poor execution, particularly slippage and partial fills. We find that many traditional B Book brokers are also looking to operate more of a hybrid A & B Book strategy and need assistance with optimising their exposure.
Another thing we are finding is brokers that are looking into establishing multiple entities within their group, such as one in a tightly regulated and reputable jurisdiction (UK, Cyprus, Australia etc) and another in a more accommodating jurisdiction (Belize, Mauritius etc). This is partly to overcome the increasing regulatory burden and leverage restrictions being implemented in the Tier 1 markets (e.g. the EU), but also to mitigate the growing AML/banking issues faced by many brokers that have entities in unregulated jurisdictions (Vanuatu, Saint Vincent & Grenadines, and Marshall Islands).
LR: Many Western firms are focusing on Asia as a key region for growth. How does IS Prime stand out from competitors in the region?
Will: We are looking to bring a more professional and analytical approach to the FX market in Asia. First and foremost, all our Group companies are regulated within the jurisdictions they are based – i.e. IS Prime is regulated by the FCA and IS Risk Analytics is regulated by the CFTC. IS Prime Hong Kong is in the process of applying for its SFC licence in HK. Not all of our peers in the region can say that.
Elsewhere, we believe we look at clients differently. Namely that we have two sets of clients, not one. Of course we have the downstream brokers, asset managers, and hedge funds. However, we see the upstream LPs, the banks, non-banks and ECNs as key clients too. We take our role as intermediary very seriously and make sure that both sets of clients are looked after and receive the highest quality service. Being part of ISAM Capital Markets provides us with a level of technological and quantitative expertise that enables us to analyse trading flow much better than our peers, allowing us to fulfill that client service obligation.
Finally, we are unique in that we offer Tier 1 liquidity, bridging and risk management services as standalone or bespoke packaged solutions.
LR: What are your biggest priorities this year?
Will: Our regulatory licence is our most important priority.
LR: What do you think are the biggest issues facing brokers in the region and how can these be addressed?
Will: The number 1 issue is policy/regulatory uncertainty in China. There appear to be indiscriminate crackdowns in the market by the local authorities, be it demands received by overseas FX brokers around Chinese New Year that they immediately shut down any physical presence in China or warnings posted on Chinese government websites about leveraged Retail FX and CFD trading. Many market participants are understandably uncertain about the industry in China. We have even seen brokers struggling to find stable gateway partners to remit funds, so more clarity is needed as to the industry framework (if any) that might be put in place.
Another market-wide issue felt acutely in Asia, is that MetaQuotes has ceased support of MT4 client terminal versions below 1065 from 1 October 2017 and has stopped selling MetaTrader 4 platform licenses to new customers (and additional servers to existing clients). With additional functions and improvements only being implemented in MT5, the pressure is on for brokers to upgrade their platforms or risk being left behind. We are seeing brokers implementing migration plans for MT5.
Finally, with the new ESMA leverage restrictions agreed, the issue for Asia is whether or not further leverage restrictions will be implemented here. We note that the FSA in Japan is looking at reducing FX leverage to 10x and there are rumours of other markets following suit.