Best prime-of-prime broker: Saxo

With its well-rounded offering and solid balance sheet, Saxo stood out as a trusted liquidity partner, regardless of market conditions

While sporadic volatility punctuated by low participation has created challenging market conditions in recent years, Saxo has maintained its commitment to its FX clients. Facing uncertainty brought about by geopolitical or macroeconomic events, the bank strove to provide the best FX prime‑of‑prime (PoP) services by further improving its sources of liquidity, competitive pricing and comprehensive range of financial instruments.

Backed by the world’s largest tier one liquidity providers (LPs) and venues, Saxo aims to offer second-tier banks, brokers and wealth managers the best possible pricing on the Street. Saxo’s clients capitalise on the bank’s sweeping PoP offering, which provides market access to spot, forwards, options and swaps, together with cash equities, fixed income, listed derivatives and over-the-counter swaps on various underlying assets, along with the credit facilitation to trade these products efficiently. The bank offers flexible margin collateralisation via cash or securities, and credits interest on unencumbered cash deposits.

Saxo caters to institutional clients of all sizes. Large clients particularly appreciate the quality of the bank’s service and offering, while those that are too small to access the services of top-tier prime brokers prize the strength of the bank’s balance sheet, akin to that of many traditional prime brokers.

In addition to an A- credit rating from S&P Global Ratings, this was confirmed by the Danish Financial Supervisory Authority when, in June 2023, it designated Saxo Bank as a systemically important financial institution.

“We are proud to have built Saxo Bank into a solid institution over the past 30 years,” explains Kim Fournais, chief executive and founder of Saxo. “We have achieved this by focusing on servicing our clients and partners well. This is testament to our strong and resilient business model, alongside the trust and confidence placed in us by our growing number of clients and partners globally, who trust us daily with their assets and cash, and use our platforms to trade the global capital markets.”

To achieve a superior level of service, the bank has continually strengthened its PoP offering. In 2023, Saxo partnered with FairXchange, a provider of liquidity management and transaction cost analysis, to acquire high-quality real-time e-FX insights covering data on spreads, skews and client trading behaviours.

By removing ambiguities around flow valuations in discussions with clients and LPs, the dialogue and level of trust and engagement between them has deepened, which has led to substantially improved pricing and a more refined liquidity offering for Saxo PoP clients.

Powered by its application programming interface components and platforms, Saxo’s technology stack allows its clients to process substantially large volumes and provide optimal liquidity allocation. The bank’s pre-trade credit risk controls and cross-collateralisation across liquidity sources, venues and providers reduce the risk of over-allocation of credit, which can be harmful during market dislocations. This removes the need to carve out credit, allowing clients to use their full net open positions with any liquidity provider.

“Saxo’s ultra-sophisticated technology stack can process up to 2.5 million trades a day in fast markets,” points out James Dewdney-Herbert, associate director, institutional FX sales at Saxo.

He says that by providing access to global LPs via major financial centres – London and New York – Saxo aims to provide the best tailor‑made liquidity, locally priced and with low latency.

“We can ‘slice and dice’ liquidity based on client requirements, creating bespoke liquidity pools, and monitor quotes to optimise client fills. The dynamic limit allocation between data centres also means clients can optimise their limits in real time.”

While managed liquidity may be the optimal solution for many of Saxo’s clients, the firm also recognises that sophisticated institutional clients with high FX liquidity requirements expect greater control of their relationships with executing brokers and liquidity venues. This is why the bank has introduced credit provision and clearing services to facilitate clients who seek the benefits of bilateral trading relationships, much like traditional credit-based FX prime brokerage services.

“[Providing] our largest clients with disclosed, bilateral trading opportunities and access to major liquidity venues, together with our own managed liquidity, completes a compelling proposition where synergies of scale can be capitalised on by both parties,” concludes Dewdney-Herbert. “As clients in the industry mature, they want to take more control of their business.”

Saxo was named Best prime-of-prime broker at the FX Markets e-FX Awards 2024.

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