Mark, IG has been extremely successful over the years in growing its retail business. Why has the firm now decided to focus more efforts on building up a dedicated Institutional offering?
Our success in retail is built on the core capabilities of excellent service, a broad leveraged product set, and advanced risk management. These core capabilities translate very well in to the corporate sector, so there are a lot of natural synergies that have helped IG very quickly scale up our institutional business. The capital restraints and risk profile of larger Tier 1 banks has meant they have pulled back from a large number of good businesses that do not have the minimum value the banks require, so there is a clear need for a very well capitalised institution who can help clients who no longer have these relationships.
The company has an exceptionally strong balance sheet. How important is that for competing in the Institutional space and what advantages does it give you?
The importance of a strong balance sheet cannot be overstated. It is critical for any company to be sure that its key suppliers will still be in business when they need them the most, and in the leveraged trading industry it is incredibly important to understand the credit risk that you are facing with your critical suppliers, whether that is a prime broker, liquidity provider, or any other service provider upon which you rely. IG’s balance sheet is one of the strongest in the market outside the Tier 1 banks and our clients and partners can take comfort from knowing that not only have we weathered some serious market volatility unscathed, but we have grown and strengthened through these periods.
What client sectors does your Institutional unit cater for?
We cater to a wide variety of institutional clients. We have been successfully servicing IB and White Label clients for many years, and our strength in product and service for brokers and banks looking for CFD and FX liquidity has seen that side of the business grow rapidly over the past year. We have also recently launched IG’s boutique Prime Brokerage servicing small- to medium-sized hedge funds. These funds are currently struggling to find (or keep) Tier 1 prime brokerage agreements, and IG’s equity and FX offering have been tailored for, and are used by, our own dealing desk so have a high degree of flexibility and great market access to a large number of LPs, MTFs, and primary exchanges globally. With our strong balance sheet and excellent service levels we are an obvious choice for funds looking for a new PB.
What asset classes are you currently offering to Institutional customers?
We offer a wide range of leveraged CFDs, including FX, global indices (many of them 24/5), over 10,000 global equities, commodities (from the high profile gold and oil to three different types of wheat!), government bonds, and interest rate products such as short sterling. Clients can also trade our equity and FX CFDs in IG’s name in the underlying markets, allowing market interaction at very low cost. In 2014 we also launched a physical (non-leveraged) equities trading capability, covering most major markets. Our institutional clients can therefore use their core equities holdings as collateral against a leveraged position – this is a very popular feature amongst equity funds in particular.
What range of services, tools and technology have you designed to support the businesses of your Institutional clients?
We have multiple connectivity options for clients which cater to any kind of trader. We developed a FIX API to cater to the market standard API connectivity, and have put huge resource and effort in to making it rock solid. We also have WebAPI connectivity with a fantastic online wiki to help developers who may not have either the need or expertise for FIX. The WebAPI is a great tool not just for price streaming and trading, but also for account management (in fact, we are seeing an increasing number of clients use FIX for pricing/trading, and the WebAPI for account management). Clients can connect directly to us, via a point of presence in LD4, or via any of the major bridge providers with whom we’re conformed.
For those who prefer a platform to trade on, we have an advanced web trading platform with access to a market leading charting package, newsfeed, and all the tools a trader needs to trade, manage positions, and watch the markets. We also have a downloadable platform which we can give to a sophisticated market participant who requires greater market interaction. This was designed in-house for our own traders and is used by them for all IG’s manual market participation so has a large number of institutionally-focused features (including algo trading on equities). And for clients who run their own Bloomberg terminals, we offer trading via EMSX.
For clients who run managed accounts we have two options – either using our professional platform or using our MAM on MT4.
We also have an online portal for institutional clients which allows them to run a large number of reports, either ad hoc or scheduled for whatever time they require, delivered in a number of formats.
What do your own day to day responsibilities within the firm involve?
One of the things I love about my job is that every day is different – one day I’ll have a full set of meetings with clients and partners, another day those meetings will be with our IT teams to discuss up-coming developments and new innovation, our marketing team to discuss upcoming campaigns, our global sales teams to discuss prospects, clients, new ideas, and successes, or our risk, compliance, and legal teams to discuss any number of a wide range of issues. Another day I’ll be sat in a quiet corner writing business plans, researching new areas of business development, and ensuring I am fully up to speed on regulatory developments! I also look after MT4 at IG, so I am certainly kept busy…
Who are the key people in your Institutional team and in what ways are they working to grow the business and service clients around the world?
We have an incredible team servicing our institutional clients, all of whom are critical to the success of our business.
We have sales and RM teams in London, Switzerland, South Africa, Singapore, and Australia working hard to service our clients around the clock; we have amazing IT teams to develop and support our trading tools and infrastructure, especially our API team which I have every confidence in saying is second to none; our marketing team has done a fantastic job on our new institutional website (www.ig.com/institutional) and continues to develop and refine our institutional branding; and our legal, compliance, and KYC specialists do a tough job very well.
A new role we have created over the past six months has been an on-boarding specialist, which we have found has been really beneficial to both our clients and internal teams in ensuring a quick and smooth on boarding experience, something clients have often told us can be a pain point in other businesses.
Prime Brokerage is a particularly competitive marketplace. How comprehensive are your Prime Services and what makes them so compelling?
I used to run the FX and Futures trading desks, so I have been on the other side when looking for the most appropriate broker for my business. The critical place I always started was on the credit worthiness of the counterparty – even amongst the Tier 1 banks that IG deals with. A PB is a critical part of the business, and when you are placing such a large amount of money, risk, and business continuity in the hands of a counterparty, you have to be able to trust them – trust that they will be there tomorrow with all your capital and positions, trust that they are de-risking your business as much as possible through their actions, and trust that they are behaving in an open and transparent way. IG has one of the largest balance sheets in the boutique prime brokerage business, and has built its trustworthy reputation over the 43 years we have been leading the industry.
Prime brokerage is, to a certain extent, becoming commoditised now – especially in FX; but the key advantages that IG have are our heritage and our balance sheet.
The international broker community are avid readers of e-Forex. What White Label and IB services do you provide for them?
IG invests millions in its technology, and our white label and IB clients can leverage off our multi-award winning platforms, both on web and mobile, to provide a market leading service to their clients. We have a web-based reporting tool that allows them to keep track of the trading their clients are doing, in aggregate and individually, in real time. We also have our MAM for MT4, and if clients want a MT4 white label we can facilitate that too.
We have an incredible team servicing our institutional clients, all of whom are critical to the success of our business.
Brokers nowadays want to trade more than just FX and demand access to many more markets. What API services do you offer and how are they helping clients to broaden their product set and strengthen the appeal of their own value proposition?
IG’s historic strength has been in its multi-asset product range – we have been offering multi-asset to our clients for decades, so we have a great amount of expertise beyond just the traditional FX. Brokers can connect to us either via FIX or our web API, and can trade all our asset classes – equities, indices, commodities, and of course, FX. Our clients can stream prices down our APIs and out to their end clients, and we ensure that both we and they are fully compliant with all data and intellectual property requirements that the primary exchanges have. This latter point is critical for brokers who are more used to FX, where there are no data restrictions, and is another example of how IG works hard to de-risk our clients’ businesses.
How important is technology to IG and in what ways are you leveraging it on the Institutional side? For example for sourcing prices and guaranteeing service levels?
Technology is critical to IG – it makes everything we do possible. We have approximately 700 people in our IT team globally, and we spend millions of pounds on our technology. Our core up time is virtually 100%1, and we have 24/7 IT support.
We connect directly to 11 FX LPs (both bank and non-bank), a number of the major ECNs, all the major Futures exchanges, and have great equities liquidity by aggregating both primary exchange and MTF liquidity, and we pass on not only this, but also our own internal liquidity meaning that our OTC liquidity is often better than market. Having said that, if a client would rather interact with the underlying market, we also offer an advanced DMA solution on both equities and FX.
IG has been operating much longer than most brokers. In what ways has that enabled you to develop deeper relationships in the primary liquidity space and what benefits does that give to your clients?
We are the largest broker in the industry, and have a long history that has allowed us to develop strong and stable relationships with the world’s biggest banks. As with our clients, we have always treated our banks and brokers as partners so have built relationships for the long term. This means that during market crises our liquidity, market access, and funds are always secure. When the Tier 1 banks were pulling back from Prime Brokerage, our status, balance sheet, and relationships meant we have retained solid backing from our counterparties. This allows clients to have comfort in having a long-term, stable relationship with IG – which again de-risks their business.
How do you think regulation will impact the broker industry?
At IG we welcome the increased regulatory focus. We have always worked closely with global regulators, and are advocates of sensible regulation to protect retail clients. We may well see consolidation within the industry, but those brokers who practice good risk management, have sustainable business models, and look after their clients should do well in the long term. Some liquidity providers may struggle in this environment, but IG’s focus on long-term, sustainable, de-risked relationships will ensure our clients have one thing less to worry about.
What new Institutional products and services have you recently launched and what plans do you have for rolling out additional ones over the next 18 months or so?
Our most recent launch has been pushing equities pricing down our FIX API, allowing broker clients to stream our pricing to their end clients. This is very unusual in the industry, especially as we are ensuring full compliance with all the data requirements for both our clients and us. The last thing our clients want is to launch a product and then have exchanges chasing them for unpaid data fees that they may not know about, so we ensure this is not a risk our clients will face. As for new products and services – I can’t tell you yet, but we have some pretty neat things in the pipeline so watch this space!
Finally, what expectations do you have for your Institutional business in terms of its overall contribution to the IG brand and what steps will you be taking to further widen its international footprint?
IG is the global leader in retail leveraged trading, and our commitment on the institutional side is to ensure we are the global leader in the non-Tier 1 bank sector. Our product is excellent; our balance sheet is peerless; and we ensure outstanding support with dedicated relationship management, a round-the-clock support team, and 24/7 IT support. We are very positive about the impact we can have and the benefits we can bring to this sector.