Swiss Franc After-Effects Still in the Air, LCG Assesses Prime of Prime Solution

The recent trend of FX Prime of Prime (PoP), an intermediary service whereby firms extend their prime brokerage relationship, is the latest victim of the January Swiss franc price crash. Forex Magnates has learned from sources close to the matter that London Capital Group’s institutional forex division is reviewing its Prime of Prime service. The move comes as no surprise to industry participants as the ripple effects of last month’s emphatic event continue to haunt providers.

The mid-tier service provided by institutional firms that facilitate prime broking has benefited from the general demise of the FXPB sector over the last two years, as banks review their risk parameters. London Capital Group’s institutional FX division has been a prominent player in the London market, the firm offering a range of forex derivatives including, spot, swaps, forwards & NDFs. The firm offers one of the widest range of ECN platforms for firms to connect via FIX API, including Currenex, FXOne, Hotspot, MarketFactory and ICAP.

London Capital Group has declined to comment.

LCG FX’s Prime of Prime offering allows firms to trade on flexible margin rates, with additional credit and collateral availability through the users bank.

The FXPB space came under fire in 2014 as a number of mid-size and large banks terminated their services. Rabobank, a popular provider among retail aggregators shut down its service in May 2014 after the bank reassessed its risk parameters, a similar exercise at Scandinavian giant, SEB Bank, which followed suit. Other players such as BoAML have integrated their FX unit in the overall PB offering.

Retail FX and PoP

Retail forex brokers have been one of the largest users of the PoP offering, the core advantage firms gain is access to liquidity. PoP’s aggregate Liquidity from multiple bank and non-bank providers thus enabling the firm to trade with best execution and pricing. PoPs can offer their clients access to credit lines offered by the PB thus allowing the firm to access credit without having to go through the on-boarding process with a bank.