Inside Swissquote: Cryptocurrency, 2.5 million listed products, Swiss banking meets LD4 connectivity and the trading environment of the future

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Rural Switzerland boasts what is most certainly a different landscape to any other central or western European nation, and not just because of the beautiful mountains, picturesque villages, the glistening lake Geneva in the distance or the towering silhouette of the unmistakable vista of Mont Blanc in the hinterland.

Differentiating this picturesque landscape from other scenic locations is the presence of some of the world’s most modern, secure and advanced banking and electronic trading powerhouses for which Switzerland is as equally famous as its stunning countryside.

As the second decade of the second Millenium enters its twilight years, the importance of maintaining a high quality and well organized operational facility within the electronic trading sector is more vital than ever.

Fifteen years ago, the plate glass examples of commercial excellence within the retail FX sector had begun to establish themselves via careful technological adeptness, proper commercial planning and have led the way as evergreen symbols of self-sufficient industry leadership, those being CMC Markets, FXCM, IG Group, Saxo Bank and Swissquote.

During those early Millennial years, these companies had become bastions of the charge to create a new and high quality environment for retail traders, with their own platforms, end-to-end expertise from the world’s most important financial centers and talent bases, backed up by the security of public listing in London, Zurich and New York.

At that time, the newly launched MetaTrader 4 platform was unveiled, giving rise to a whole new environment in which small companies could sell FX products to a global retail audience without having to invest any knowledge or resources into the comprehensive structures generated by the pioneers, however time has demonstrated that, despite Cyprus having opened the door to European regulatory licensing and a populous small brokerage business having burgeoned around the world, there is no substitute for quality.

The MetaTrader 4 platform is now entering its nadir, soon to be obsolete and is doing so at a time subsequent to which many smaller brokerages whose leadership is a product of marketing and sales over function have fallen foul of reputation damaging incidents and regulatory purges, hence the same applies now as it did at the very beginning of the electronic trading boom for retail customers – that being that there is still no substitute for quality and expertise.

Leadership is the essence of quality

Today. here in the foothills of the Alps in what is probably the most financially secure, vault-like nation on earth, FinanceFeeds looks at the company’s ethos and future plans, from within the senior management’s technologically advanced, completely home-grown methodology.

Leadership is everything, and at Swissquote, the credentials are indeed stellar.

Marc Bürki has been the Chief Executive Officer at Swissquote Bank since March 2002 and Swissquote Group Holding Ltd. since 1999.

Mr. Bürki serves as Founding Partner of Swissquote Group Holding Ltd, and served as Head of Sales and Marketing at Swissquote Group Holding Ltd. Until 1990, he worked as a elecommunications specialist at the European Space Agency in Nordweijk (Netherlands). In 1990, he co-founded Marvel Communication Ltd which was the initial moniker that Swissquote used.

In 1999, he became a Director of Swissquote Group Holding Ltd and Co- Chief Executive Officer of Swissquote Group with Paolo Buzzi. Mr. Bürki graduated from the Swiss Federal Institute of Technology (EPFL) in Lausanne, in 1987, with a degree in electrical engineering.

Mr Buzzi is currently Chief Technology Officer of Swissquote Group Holding Ltd and Swissquote Bank Ltd, and as a founding partner of Swissquote Group Holding Ltd alongside Mr Burki, Mr Buzzi has an equally elevated commercial and educational background.

In 1988 he graduated from the Swiss Federal Institute of Technology (EPFL), Lausanne, Degree in micro-engineering, before embarking on a professional career that started at Rolm Systems in Santa Clara, California where he was a Software Engineer and New Technology Integration Engineer.

Between 1990 and 2000, Mr Buzzi was Marvel Communications SA, Co-Managing Director, during the period at which Swissquote operated under its original nomenclature. He then assumed the position of Chief Executive Officer at Swissqute in 2000.

Since 1999, Mr Buzzi has been Co-CEO of Swissquote Group Holding Ltd, and has been CTO of Swissquote Bank Ltd since 2002.

The company’s long and considered evolution has resulted in a very highly sophisticated headquarters which hosts an internal development and support team that is responsible for the proprietary trading environment, institutional technological integration into broker partners that would use the Swissquote system and prime of prime brokerage solution, and the entire operational facility which enables direct access to 2.5 million tradeable products globally.

Crypocurrency. A dangerous fad, or a genuine commodity?

Meeting with Swissquote’s Head of Market Strategy Peter Rosenstreich, a senior FX markets anchor who is a regular feature on mainstream broadcasting channels including CNBC, Swissquote’s provenance with such a vast portfolio of products that are current mainstays for many customers globally is an ideal backdrop for discussing what could be seen as a faddish attention-grabber by the less well established, that being cryptocurrency trading.

Mr Rosenstreich explained “Cryptocurrency certainly can fit into modern financial markets, as with existing currency regimes. What has to be looked at is whether Bitcoin is as good as dollars, or gold or other commodities? Where it fits within this regime is where I come in.”

“Questioning its use brings a dichotomy into sight. Traders and analysts can either believe the current banking and govenrmental system is working fine, and it has no issues hence it will be here for forseeable future. The other side is represented by those who consider that fiat currencies and monetary policy regimes are not working and there are clearly broken parts” he said.

“I agree with you that cryptocurrency will not take over from fiat currency and therefore it looks like the current prices are very inflated, however it is very easy to say that whilst sitting here in Switzerland” he said.

“It may not be case in parts of Europe, and definitely cryptocurrencies will likely not dominate in very established and democratically run major nations such as the UK, the US or Japan as there is no need to take such risks when the business, government and commercial environment is so well organized, but if you look at places like Zimbabwe or Venezuela, for example, along with other similar countries that governments and policy makers’ right to control and monopolize exchange rates has broken down, this is more likely to be where the main use will be” – Peter Rosenstreich, Head of Market Strategy, Swissquote Bank SA

Mr Rosenstreich further explained “This is the first question that needs to be looked at. I am on the side that in this context there are broken parts of the system when looking at things from a global perspective, and there needs to be a solution, thus in this case cryptocurrencies are a solution. The government in places like Venezuela have told people to their face that they are going to devalue their hard work and stop them providing for your family, which goes against everything that currencies represent.”

“It is very easy to sit here in Switzerland and say buy gold, but that is not so accessible in a great many markets, so this is where cryptocurrencies come in and are interesting because they do solve these issues very succinctly” he said.

“I think it is a good idea to try to think about which cryptocurrencies may be in a position to solve those solutions. I would say that I don’t expect cryptocurrenceies to relieve the world of all traditional fiat currencies, but I do believe that some investors will store wealth in a cryptocurency and interact with the usual everyday world in local currency, for example they will buy milk in dollars, have their hair cut in Euros and so forth, but ultimately will be able to hold wealth in a format that is untouchable by traditional governments” – Peter Rosenstreich, Head of Market Strategy, Swissquote Bank SA

Mr Rosenstreich’s perspective is that “This is particularly relevent to despotic governments and irresponsible national leadership, therefore its overall value should continue to appreciate, but I do not see the supply of fiat currency bein replaced, hence some of the targets have been over estimated.”

“An accumulation phase has now taken place, outstripping the utility phase, so you need further evidence of valution and therefore a pickup in utility, hence the need to be able to see more brick-and-morter firms and banks using it on a daily basis which may well start happening” he said.

“In terms of brokers, the business side will iterate. Brokers need to be very careful when trading leveraged cryptocurrencies, as the validity of the cryptocurrency is still highly debated, so the swings are still very likely to be vast in either direction” he said.

“For example, if Amazon decides to adopt it, the swing on the upside will be massive, or if the Chinese government blocks all IP addresses of cryptocurrency related industry, be that currency trading or using it as a commodity or investment material that would make a massive downward effect” explained Mr Rosenstreich.

Mr Rosenstreich considers that the effect on a currency that is still being validated, and has no central backer, would be extreme. It is like a child’s development, in that an event that effects a child in its immaturity, would still blight him or her when 40 years old so the volatility would always then be present.

Looking ahead, Mr Rosenstreich said “2018 may well bring a strong hand by the US government, due to relationships between North Korea and crypto, and other anonymous activity using cryptocurrency. I don’t think the funding for heroin users on Silk Road was really of concern, but the link between anonymous market places and potential national security issues most certainly would have been. One day, Donald Trump may well consider the security aspect and simply put an end to the use of Bitcoin.”

“Other practical considerations to bear in mind include the electricity cost which is so high now, and therefore countries that are subsidizing electricity use such as China, India, or Saudi Arabia may have an advantage because by doing so they are are subsidizing the miners. From a government standpoint it would be easy to make it unviable, and if that happens the cryptocurrency world would just be left with anarchists and that is not a business” – Peter Rosenstreich, Head of Market Strategy, Swissquote Bank SA

Looking at how Swissquote approached this market, the firm has launched a series of crypto coins, and Mr Rosenstreich’s department has started putting together actively managed cryptocurrency products. The first one is the Bitcoin Active Certificate, which is part bitcoin and part USD, the idea being to smooth down the volatility. Ideally, it is geared toward traders that would benefit from security, as there are no wallets, and traders do not need to approach the cryptocurrency market via unreliable or unbacked crypto exchanges.

“The product trades on SIX exchange and we think that our role as strategists is to create instruments that help people trade the crypto universe and we will continue to do that for this year” said Mr Rosenstreich. “It is important to change the dynamic a bit because the underlying key utility is that you have complete and total control of these and by trading via CME it becomes more of a speculative instrument” he concluded.

The first Swiss electronic trading bank to begin hosting its infrastructure in London

Today, FinanceFeeds gained a comprehensive insight into Swissquote’s vast project which involves conducting an industry first for any Swiss Bank which provides electronic trading, that being the move toward hosting at Equinix’s LD4 facility in West London.

Long-term Swissquote executive and current Head of Institutional Foreign Exchange Sales Ksenia Zubkhova detailed this project this morning.

Ms Zubkhova’s introduction into the sheer size of such a project took into account the large scale logistical and practical considerations, as well as the size of the company and its forthcoming expansion.

“We have currently 500 people here in Gland, and then further staff at our other offices in Dubai, London, Hong Kong, Zurich and Bern. There are currently 70 open positions which we need to fill by March 2018, two third of which are within the IT division, mainly programmers for the Private Banking platform, and share trading, banking and FX platforms” she said.

“We have a lot of plans for programming for this year, hence the very high demand, and such professionals are not always easy to find as this is a very specialist skill. Skill sets like this are often concentrated in London or other areas where there are large banks and non-bank providers with propreietary platforms. We currently have a vast number of different projects because of the different divisions within the company, including our large white label solution that we operate for PostFinance which is a division of PostBank of Switzerland. It is a big partnership with Swissquote which started with a straight forward white label but then led to other ideas for white labeling the solution. We started custodian services, discovered the needs of the clients and need to adjust the system for demands of clients” – Ksenia Zubkhova, Head of Institutional Foreign Exchange Sales, Swissquote Bank SA

In terms of other projects, Ms Zubkova explained “This year we have an Interbank FX project to go from margin and deliverable FX, which is in progress and should be ready for end of the year as there is a lot involved in its development and implementation.”

“Perhaps the most revolutionizing but most advanced project in the respect that we have completed most of the infrastructural work require is our move from our existing in-house data center which is underground here in Gland to Equinix’s LD4 location in London” she said.

“For the needs of clients and FIX and exeution and pricing speed, we will be moving to LD4 and will not only need this for connectivity but globally, we need to replicate other pricing engines in London and for execution. The main server will stay here but we will host a second one in LD4 so it is a very big project between our FX dealing department and IT division, which will help us stream prices between LD4 and all the venues that are being worked with such as oneZero, PrimeXM, Integral, along with others in the pipeline like FXSpotstream, hence we will be able to plug into any pricing engine from London so that it doesnt have to go to Switzerland” – Ksenia Zubkhova,Head of Institutional Foreign Exchange Sales, Swissquote Bank SA

“Infrastructural reasons are a big technological and logistical challenge which is a consideration but we are very much able to complete this inhouse. One of the most important matters to consider outside technological planning is that our Swiss banking license requires specific laws about hosting and ringfencing. We are outside the EU so we are free from certain stipulations but a lot of our corporate clients are FCA or CySec regulated so we have to comply with that too, however to move the datacenter outside Switzerland requires continual work with FINMA, the Swiss banking regulator, to ensure that its move to London meets Swiss Banking requirements on trading infrastructure” she said.

Romain Le Baud, Head Forex & Digital explained the proposed expansion of the firm at the Gland facility. “Two years have now passed since we completed the construction of this new building which doubled the size of the existing one, and we now have plans for further expansion on this site, which will take place on the other side of the street.”

“We own the land and are about to begin the clearing of the old buildings in order to create further office space there. Currently, we are one of the largest electronic trading firms in the business with 22 billion CHF in assets under management which includes our securities trading division and every business unit. In terms of FX, we have around 400 million CHF in assets under management, which means that Swissquote is respected highly by the Swiss banking authoriites. The 2.5 million products that we offer are executed not just on an OTC basis but the majority are on NICE, EUREX, and SIX. FX represents around 200 products” said Mr Le Baud.

Expanding on the execution methodology, Jurg Schwab, Head of Trading, Director and member of the senior management at Swissquote explained “Swissquote is a direct member of Euroclear, and it is very rare in the electronic trading industry to have direct access to stocks. We also have a dedicated bond platform, which executes on an OTC basis. All trades are cleared onsite” he said.

“Switzerland is one of the few countries where bonds are listed on exchange, however for global markets we do it on an OTC basis, whereas we are a full member of Eurex for trading and clearing, this being a USP in Switzerland” Jurg Schwab, Director and Head of Trading, Swissquote Bank SA

“We specialize in providing online direct access for customers, therefore we do not differentiate between trading option on US stocks such as Apple or on Swiss stock and the trading experience should be equally accurate for both, as the margin is all calculated in a fraction of a second” he said.

“We also have a well recognized OTC platform called SwissDOTS. The name is derived from a contraction of “Derivative OTC System”. We currently work with five partners which offer over 80,000 leveraged products. Comparing this to all products traded on SIX, there are around 25,000, hence SwissDOTS users can access three times more products than SIX, and the opening hours are from 8.00 am till 10.00 pm, so therefore traders wishing to trade after the hours that other venue may close trading for the day can continue to trade derivatives on SwissDOTS”Jurg Schwab, Director and Head of Trading, Swissquote Bank SA

“EUREX is the biggest one, where we provide US on-market products, and then we provide warrants on SIX, then SwissDOTS OTC, followed in size by the London live market and the Asian market. I put every thing together because we have less volumes on the others than on some, however derivatives are a mainstay of the business” he explained.

“During the founding of Swissquote, listed derivates were the backbone of the company. The warrants that we provide are mostly indexes, equity, bonds, commodities and realestate but the main underlyings behind the warrants are indices and equities, with a global customer base. The majority of the customers for listed products are in Switzerland, we dont actively seek overseas firms but we do have 300,000 customers globally in trading” said Mr Schwab.

“Everyone has access to all the products on one single platform, incuding our entire securities business, and credit facilities but also traditional FX. For leveraged OTC margin FX, we also provide our own proprietary Advanced Trader FX platform, or MT4 and MT5” he said.

“Since launching the Swissquote portal, traders can see their trading account for securities, all FX accounts, payments and withdrawals all in one place” explained Mr Schwab.

In terms of size, Mr Schwab confirmed that the average daily volumes for listed derivatives amount to several thousand executions per day across 2.5 million products.

Swissquote senior executive Ryan Nettles speaks to FinanceFeeds about asset class diversity, America’s appeal and the importance of multi-product direct access

The interesting aspect here is that despite the listed derivatives aspect of Swissquote’s business being so vast, the firm is mostly recognized for this in its home market, whereas abroad it is a major FX and OTC firm as well as an institutional prime of prime brokerage, however those represent just part of the firm’s business.

“Even if some areas only sell FX trading, the customer will see who Swissquote is and will discover the wider product range having experienced the platform. Swissquote is not allowed to do acquisitions and marketing outside Switzerland, hence this leads to advertising a lot of FX in global markets but of course if a corporate or retail customer in any global market wants to use the derivatives system they certainly can at their own choice” explained Mr Schwab.

“Many brokers don’t realize the extent of the banking services we offer plus FIX risk coverage. Some FX firms from Cyprus perform currency conversion on their trading account which is a multi-currency account. They can do payments with the clients and corporate payments as well as use the custodian banking system with us. The aim of the company is to provide full facilities for trading. The banking aspect is a complimentary solution to the trading” he said.

Creating a quality corporate environment is the only way for sustainability

Within the Institutional FX Services division of the firm, FinanceFeeds spoke to Felix Cloke, who explained the ethos and corporate environment within Swissquote.

“At the beginning of my career, I was a teacher, and susbequently workded in the high end wine industry before coming into the FX industry by joining FXCM in London some years ago” he said.

“It is very important to note that Swissquote has been able to create a corporate environment which encourages long service among employees, something that is quite rare in certain areas of the FX industry. When I began in the industry in London, due to my previous experience as a teacher and in the luxury business, I had never seen someone be fired from a high level executive job but people were getting fired routinely during the early 2000s at London firms. This shocked me however at Swissquote, the founders are still co-CEOs, and there is a vast amount of highly experienced talent that has been with the company for many years and is dedicated to quality.” – Felix Cloke, Institutional FX Services, Swissquote Bank SA

“Swissquote is not strict on hours, but often I will come in at the weekend, whereas some of the firms in major centers are very rigid with working hours. Investing in the right young talent and then keeping it is worth it” he said.

“I came from FXCM to MIG, then came across to Swissquote at the time of the MIG acquisition” he said.

“I find that at many firms in other regions, presenteeism is taking precedence which hampers effectiveness. I was in operational support at FXCM, and the company was very specialized as in one person was allocated for each task, but they wanted to bring in people who were trained in everything that could happen within the firm, and whilst this was a great opportunity, people would have to log everything that was done during the day and get points, and employees were expected to get points for completing specific things. This is counterproductive because the more logging you do the less effective you are therefore rather than doing 8 hours of work and being ineffective, you could do 5 hours effectively. This demotivated a lot of good people, and they left” he said.

“Whilst it was a high pressure environment, I was fortunate to begin my career there, as geniuses like Brendon Callan are some of the original mainstays. He was CEO of FXCM Europe, and came to me to offer me a 2 hour tour. Usually the CEO would not make such an effort, but this shows the leadership capabilities. Paulina Alenkina, Mike Higgins and Francois Nembrini were all excellent role models at early stages of my career, indeed I would say they were inspirational” he said.

“Working in the institutional sector from those days till now, it has become clear that once you make your clients your friends, it does not feel like work anymore” said Mr Cloke.

“It is very good to be able to talk openly with brokers about their requirements. One particular matter of importance is the quality of the liquidity that is being offered in the retail sector” he explained.

FinanceFeeds concurs that there are only a handful of real Prime of Prime brokerages in the world, however many non prime of primes are using the word ‘prime’ incorrectly. This is also a moot point or Mr Cloke.

“Most definitely the word prime is in several cases being used as a marketing tactic, and such companies actually make aggressive sales campaigns which often belittle their competition, whereas at this level with companies such as Invast, CMC, Advanced Markets and Saxo Bank, the relationship is good between the companies and therefore it makes sense to refer clients to companies that we know have strenghts in certain areas, for example, IG Group for CFDs” – Felix Cloke, Insitutional FX Services, Swissquote Bank SA.

“We are expanding within the institutional sector, and one of the factors that created the demand for expansion is that clients can find a solution for private bank or family office, however for many years we have been the only provider of such services with a 24/5 desk. Most private banks do not have 24/5 service. When you want to get involved in multiasset private banking, we have all the strength of a Swiss bank but also the strength of the FinTech company which is in line with the modern method of operation, whereas a lot of family offices and private banks are still working from Excel spreadsheets” he said.

Mr Cloke said “Existing customers wanted to be rewarded, therefore new product ranges are often quick to market as we develop the systems inhouse. For example, with our cryptocurrency range, a month after making the decision to build it, it had been created so the concept/development/delivery in a month is unusual, especially when many legacy family offices are working on Excel. If there is a business need we can develop it and make it happen. Swissquote was first European bank to offer cryptocurrency trading. This generated a lot of attention and the numbers of account opening requests which are higher than average” he said.

Finalizing the day’s informative look at the company’s operations, senior Swissquote Director Ryan Nettles spoke to FinanceFeeds about a very important point, and something that FinanceFeeds has been an advocate of for some time, that being the participation in the US market by good quality overseas firms, something that is very much lacking at the moment.

Mr Nettles said “The US market is absolutely ideal for good quality brokerages to enter with an RFED and FDM license from the National Futures Association at the moment. For example, a company that offers EFP CFDs, different types of asset classes which appeal to very analytical US customers that are used to quality futures market access and often have large portfolios that they trade over a long period of time would be in fine stead to do so. Those offering listed derivatives should connect directly to CME or ICE from within Chicago if becoming a FCM, US market very amenable to firms doing this.”

FinanceFeeds agrees wholeheartedly.

Featured image: Swissquote’s founding partners and co-CEOs Mark Burki and Paolo Buzzi with Andrew Saks-McLeod at the firm’s ultra-modern facility in Gland, Switzerland

The post Inside Swissquote: Cryptocurrency, 2.5 million listed products, Swiss banking meets LD4 connectivity and the trading environment of the future appeared first on FinanceFeeds.