Established by two leading figures in the e-FX arena, Raj Sitlani and Jonathan Brewer, IS Prime has been providing prime of prime (PoP) solutions for almost three years now. Finance Magnates sat down with Mr. Brewer, Managing Partner, to discuss regulations, the state of the industry and how the law of unintended consequences may be embodied in retail brokers going offshore.
How do you view the current state of the industry?
The retail FX industry to me seems to be in good health, although I’m sure that most participants would be keen to see a little more volatility. It seems as though the larger brokers are getting larger and that the smaller guys and start-ups are finding it a little more difficult to grow (with the exception of Asia), which would suggest that a period of consolidation may be approaching.
One general theme that we are experiencing is that brokers seem to be looking to move away from the ‘close your eyes and swing the bat’ risk model, to a more controlled, more quantitative approach which yields better, more consistent returns. This is an encouraging dynamic for the industry as a whole, and for IS Prime, in particular, given the resources available to our clients through IS Risk Analytics (ISRA).
IS Prime entered the prime of prime market three years ago. What are the main challenges that the company has faced so far?
We had a clear vision from the outset – to build a market leading prime of prime offering, leveraging state of the art technology and quantitative research and trading – but starting a business from scratch in a competitive industry was a big challenge in itself.
Within just under three years, I believe that we have established ourselves as the best prime of prime brokerage in the industry. We have a very strong market share, with almost 100% client retention rate over three years. Many clients have proactively moved their business to us, which I take as a huge endorsement of the quality of our offering.
Finding the right people for a new business can also be a challenge. We have been able to attract very high calibre, experienced and motivated people into our team and they have played a major role in our success to date.
Our challenge moving forward is to spread the word about our expertise to a global audience and to continue to evolve our offering in order to remain a market leader.
What is your opinion on the latest FCA limitations on forex retail trading, and how do they affect IS Prime?
The impact of this happens downstream from us because we do not service retail clients. However, as a general comment, whenever the regulator intervenes in this way in order to try to protect retail clients, it often has the opposite effect. It can drive these very clients to offshore brokers who are able to offer terms that FCA brokers are no longer able to offer. This is not, in my view, beneficial for the industry or necessarily the clients whom the regulator is trying to protect.
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The FCA is a highly respected regulator and their actions are motivated by protecting the industry/consumers. However, the law of unintended consequences often comes into play when intervention occurs.
What trends do you currently identify in the prime of prime brokerage market?
We are seeing that clients in all key retail FX territories have the same priorities. They are looking for an FCA regulated prime of prime broker who can offer highly tailored liquidity and a breadth of products including risk services.
Clients of all sizes are becoming more and more sophisticated and therefore the calibre of a PoP’s technology offering is also a key consideration for them when selecting their PoP broker.
What are your goals for the company over the next few years?
Our focus remains the same as when we set up the business – to provide highly tailored liquidity, risk and margin solutions. Our immediate goal, however, is to attract a broader range of international clients and to continue to develop our technology and service offering.
In the mid-term, we are in the fortunate position that we can look to be opportunistic in opening new business lines or acquiring complimentary businesses, without deviating from our main, core operation.
What do you think sets you apart from the competition?
IS Prime provides a one stop shop that incorporates liquidity in FX, indices and commodities, technology, revenue share and risk services to brokers of any size or sophistication. We are different from most competitors as we are not a white label of someone else’s technology. Through our philosophy of buy and build we have constructed a unique PoP solution, with very advanced proprietary technology.
There is simply no other PoP provider that offers the breadth of service which is available from IS Prime. We stand out in the market because of the combination of our liquidity, risk services, technological and quant resources and experience of our team.
What new fields or opportunities do you see as growth potential in the market?
Over the last year we have set up an office in Hong Kong and acquired a risk consultancy business in the US. These both present IS Prime with huge growth opportunities.