FNG Excusive Interview
London based Prime-of-Prime institutional FX services provider IS Prime set up shop in Hong Kong four years ago, and has seen significant growth as the Asia region has continued its emergence on the global FX scene. FX News Group spoke to Will Robbins, IS Prime’s Head of Asia in Hong Kong, to find out more about the trends in the region and the reasons behind the firm’s success.
FNG: Hi Will, and thanks for joining us today. What are the main reasons for IS Prime Hong Kong’s significant growth over the last year?
Will: Our growth can largely be attributed to the solid foundations we put in place from 2017 and the reputation our high-quality offering is steadily gaining.
Obtaining our Type 3 license from the SFC enabled us to broaden our regulated FX offering to our Hong Kong client base, but it also had a far wider implication – it demonstrated our long-term commitment to the region and to the highest standards across all areas of the business. Clients appreciate the fact that our group, ISAM Capital Markets, is majority owned by a large institutional, systematic hedge fund manager in the UK and that IS Prime is also regulated by the FCA. These are clear indicators that we are a professional institution.
In Asia, clients trade on relationships as much as on the quality of the counterparty. Building partnerships with the decision makers and owners of brokers around the region isn’t something that can be done overnight. We have dedicated a lot of time over the last four years to forging these relationships and we now feel we are gaining real momentum.
We offer multi-asset liquidity, technology and risk management services and are very proud to have built a broad client base from across the region, including Hong Kong, Singapore, Japan, Malaysia, Indonesia, Cambodia, Thailand and Malaysia. Over the last year, we have seen exceptional growth, in part as the volatility in the markets has resulted in higher volumes but also as we have grown our client base. We have onboarded an impressive number of high calibre and well-established brokers, asset managers, hedge funds and proprietary traders and are also working with a number of start-ups as the market continues to grow in the region.
When we opened our office in Hong Kong, ALL of the sales calls were outbound and virtually no one in the region had heard of IS Prime. Now we regularly have prospective clients proactively calling us. It shows how far we have come.
FNG: What are the trends you are seeing across the region?
Will: From the outset, it’s important to recognise that Asia is a diverse region divided between the more mature Tier 1 jurisdictions like Hong Kong, Singapore, Australia, New Zealand and Japan, and the younger, emerging markets. In these younger markets, there’s a further split between those that are regulated, such as Cambodia and Indonesia, and those that remain unregulated such as Malaysia, Vietnam and Thailand. It is unlike other regions, where you may find a common language and culture, or even legal and regulatory equivalence, so it is sometimes hard to paint Asia as a market with uniform trends.
That being said, one key theme has been the growth in offshoring. This has come both in terms of legal trading entity incorporation and customer service/operations relocation, as brokers look for ways to continue servicing existing business and growing their client bases in the region as it develops and changes.
Increasing regulatory requirements and, in some cases, outright restrictions in established markets have resulted in lighter touch, offshore jurisdictions being sought out as places to potentially re-incorporate. The more well-known markets such as Vanuatu, BVI and Belize remain favourites but the list has expanded to include the likes of Saint Vincent and the Grenadines, Samoa and The Marshall Islands, to name but a few. Malaysia that has been one of the greatest beneficiaries of the recent trend in offshoring within Asia as brokers look to leverage the benefits of its geographic location in the heart of the fast-growing SE Asian market, the diverse, well-educated, multi-lingual workforce and the relatively low costs for of operating a business.
Another major trend we are seeing relates to risk management. In some of the less developed markets, in particular, we have been surprised by how rudimentary some brokers’ in-house risk management systems and procedures have been (and in many cases remain). Many still manage risk on an eye-ball level, whilst some others simply use excel spreadsheets or pen and paper. After the drop in volatility after March and into April 2020, we saw a noticeable increase in clients wanting our support for risk management and risk analytics. In an increasingly systematic and low latency market, the fact that we can automate the risk analysis and management process for brokers and help them to identify, isolate, and remove toxic clients has had huge appeal. We have found that when clients look to add risk management to their solution or change their bridge, they tend to want it bundled with our liquidity into a package – and this has been great for our business.
The pandemic coupled with other specific market events, like the inversion of oil prices in April and the run up in gold prices in August, have also accelerated the appetite for risk management. Working from home forced many financial institutions to review their internal processes, particularly around risk management during periods of market volatility. This resulted in a surge in interest for our offering.
Retail brokers in the region tend to service their clients well. However, one further noticeable trend is that their underlying clients are becoming increasingly sophisticated and therefore the brokers are increasingly recognising the need for external support to accommodate this – whether that is better execution, hosting, risk systems etc.
It has taken a while to educate the market, gain trust, and for potential clients to understand that we are here to help them to optimise and enhance their operations, not to replace anyone from within their organisations. There is an increasing acceptance that there is a value in paying for quality services – and that with our technology and pricing we can help brokers improve their overall profitability.
FNG: What kind of client base have you built?
Will: As alluded to above, thanks to our broad range of liquidity, risk and technology solutions, we have built a diverse client base, ranging from start-ups and early stage brokers through to large regulated institutional brokers, money managers and funds.
Clients vary in their risk appetites, with the majority employing a hybrid risk model and the remainder opting for the 100% STP approach.
We understand the differing requirements of our clients and the markets in which they are operating. This enables us to tailor bespoke solutions and packages and to develop strong and sustainable partnerships.
FNG: What are you plans for 2021?
Will: We are looking at further growth across the region and development of our offering with a number of new instruments, technology solutions and risk services due to be announced over the course of 2021.2020 crystallised our business in the region and we are now in a very strong position for continued growth.