August 14, 2019 - Recently FX Prime listed their FX services on LiquidityFinder. We spoke with Andreas Rinner, Managing Partner at FX Prime based near Zurich (Switzerland), to understand more about the company and the services they offer.
(Sam Low, Liquidity Finder) Hi Andreas, please can you introduce yourself and FX Prime.
(Andreas Rinner, FX Prime) Hello Sam, thank you for taking the time. Most people in our team spent many years working for major banks and asset managers. The company started off in 2014 initially as an outsourced FX desk for three wealthy European families. Over the years we have grown into a bigger operation with a current annual volume of about USD 70 billion, mainly in FX options.
Andreas Rinner, Managing Partner at FX Prime (Photo Source: LinkedIn)
(SL) What services does FX Prime offer and what is a typical day like?
(AR) We cover most FX and precious metals products, our specialty is advisory and best execution for yield enhancement strategies with FX options. We have quite a unique setup where we can give clients interbank access to the 20 top banks, and for each transaction we book the best price directly to their custodian. In terms of risk nothing changes for the client, he only faces his custodian while our prime broker faces all other counterparties.
A typical day starts probably the same way as for anyone else in the market. First thing in the morning we check all major markets and exchange rates. Has there been anything happening in Asia that affects our clients and if yes how to react. Then in the office we check what events we have today and discuss those things with clients. How to place or change orders, how to restructure positions or add new positions.
(SL) With regards to the options desk at FX Prime, what type of customers do you serve and what do you offer them?
(AR) Our infrastructure is suitable for most client types be it private, corporate or institutional. But due to the history of the company we mainly serve private professional clients, family offices and smaller multi asset funds that don’t have a dedicated FX execution desk. In short, we offer those clients a prime brokerage setup without the usual fixed cost, directly connected to different custodians.
(SL) Are you advisory or execution only or both?
(AR) It can be both but most clients actually appreciate a certain exchange of ideas. Thanks to our independency we are not bound to the views of any institution. Each of us might give the client a different personal view, but this is what many clients value and in the end they form their own opinion. Many are successfully executing their option strategies for years over us and need little advise. Others appreciate us being more proactive when we see interesting levels as often FX is not their only or main business. The typical profile are successful international entrepreneurs, their asset managers or family office.
(SL) Is there a new type of customer that you are seeing coming to the market?
(AR) There is indeed. Due to the negative interest rate environment in the Euro area and Switzerland in particular, investors are increasingly looking for yield on cash. Currency diversification makes sense for many investors, rather than holding all cash in a single currency. FX options offer an attractive source of yield, provided one has access to multiple liquidity providers i.e. attractive pricing. Our infrastructure combined with our service level and the experience that our team offers is quite a powerful combination.
We also see a renaissance in the advisory business as there is almost nobody left who still gives independent advise with skin in the game. Therefore, I think we don’t have to be to afraid about technology and AI. We also appreciate technology in our systems where it makes us faster but after all we are still dealing with people. It is rather the combination of technology and personalized service that makes the most attractive offering in my view.
(SL) Could you please provide an example of a yield enhancing options strategy that you provide for clients?
(AR) The most typicial strategies are actually relatively simple. Many Swiss based investors and asset managers hold substantial amounts in CHF, cash that are subject to negative interest. By selling CHFNOK or CHFSEK low delta calls (unleveraged) we are able to create low single digit returns without much increasing their risk. It might actually be reducing their overall risk as a some currency diversification is positive.
These days we also sold small amounts of puts on GBPCHF. This sounds risky, but again to diversify a small amount of your cash holdings from CHF into GBP 5-6% below current levels seems ok for our clients.
(SL) What tools do customers have to see the daily value of their options contract?
(AR) Customers always see the P&L of their positions in the system of their custodian bank. For execution they can have an e-tool that aggregates all our liquidity providers but our typical option tickets between 5 and 50 million notional are mostly done voice or over chat as the market for that is not so liquid.
(SL) What type of options do you offer at FX Prime and what is the most popular? Do you cover Emerging Markets as well as main market currencies?
(AR) Our clients mainly use vanilla options for yield enhancement in majors and they have been doing that successfully for years. Less for emerging markets, except for some clients who have natural or business exposure in those markets.
(SL) Thank you for the introduction to FX Prime, Andreas. It was a pleasure speaking with you!
(AR) Thank you for your time Sam.
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