Finance Magnates Interview 26 Degrees on acquisition deal and FMLS 2022

2022 has brought many important moments for 26 Degrees Global Markets, including the announcement of plans to acquire GMO-Z.com Trade UK and attending the Finance Magnates London Summit (FMLS).

Finance Magnates recently took the opportunity to sit down with 26 Degrees Global Markets CEO, Gavin White and Chief Commercial Officer, James Alexander, and discuss the year that’s been.

The interview focused on three key topics. They discussed plans to open a London office, key talking points in the industry at the moment and what brokers are currently looking for from a Prime of Prime.

Here’s what they discussed.

Plans to open a London office

In alignment with the acquisition announcement, Finance Magnates were curious to learn more about the vision for the London office. Gavin and James both agreed that a UK base will open the Prime of Prime up to a broader audience.

Gavin said, “like the 26 Degrees teams in Sydney, Cyprus and Japan, the team that we have acquired are just as single minded about delivering world class solutions to their clients. Having an office here in London will open us up to a broader audience, both in terms of clients and potential staff, where we have big ambitions.”

James shared his belief that, “London is, and always has been, a financial services hub with a lot of innovation and incredible talent. We are excited to open an office there for those reasons alone but also to be closer to our valued clients.”

The timing of the 2022 FMLS conveniently allowed some of the 26 Degrees Global Markets team to travel to London just after the deal was announced.

Key points of discussion from the FMLS panels

Both Gavin and James participated on panels during FMLS, Finance Magnates invited them to share what they believed the key takeaways were. For Gavin, the focus appeared to be on ‘spread wars’ and emerging opportunities in the over-the-counter (OTC) liquidity space.

“One of the most important trends we are seeing heading into 2023 is the continued pressure on our broker clients in Japan to maintain artificially tight spreads, resulting in somewhat of a ‘spread war’.

In response, brokers are looking for different instruments that are less reliant on spreads such as Indices, Equities, and structured products, such as Pairs, to generate alternative revenue streams.” Gavin explained.

He continued, “at the same time, we are seeing Tier 1 prime brokers increasing reluctance to provide OTC liquidity and some exiting the space entirely. This could be seen as a potential risk to some smaller Prime of Prime brokers but provides a strong opportunity for 26 Degrees to continue to grow.”

James noted Market Data as “a segment that sometimes gets overlooked in favour of ‘more interesting’ topics such as liquidity and execution”, highlighting the importance of having industry-wide conversations across all areas.

“At 26 Degrees Global Markets, we see the facilitation of a genuine multi-asset trading solution based on a robust market data offering as crucial in our ability to attract, cross-sell and retain broker clients. The all too often overlooked component of market data is the speed and efficiency of delivery via fast and resilient trading infrastructure and networking,” he explained.

Both panels emphasised pivotal shifts across the industry.

What are brokers looking for in a Prime of Prime?

Finally, Gavin and James were asked their opinion on the current demand from brokers in the Prime of Prime space.

Gavin stressed the importance of offering “a genuine multi-asset solution. Prime of Primes that can offer a wide range of products on top of FX allow brokers to differentiate themselves from competitors and generate alternative revenue streams.”

“With the withdrawal and scale back of some Tier 1 PBs from the prime brokerage industry, access to credit has also become a larger talking point. As credit becomes harder to come by, those larger Prime of Primes with larger balance sheets and access to Tier 1 PBs will benefit and become more attractive to retail brokers,” Gavin explained.

For James, his belief is that “slowly but surely, brokers are becoming more interested in market data discussions and realising the value that a robust market data solution can provide. Prime of Primes that can offer fast market data delivery in a cost-efficient way, encompassing an entire suite of products is becoming increasingly desirable.”

26 Degrees Global Markets reflect this sentiment in striving to offer a genuine multi-asset solution and establish a robust market data solution for clients.

Overall, from the insights of 26 Degrees CEO, Gavin White, and CCO, James Alexander, it has become clear that the future of 26 Degrees Global Markets holds potential. An expansion to enter the UK and establish a London base will allow the 26 Degrees Global Markets team to be closer to their clients, where they will focus on addressing key, industry-wide changes. This will allow the Prime of Prime to respond and cater to the changing needs and wants of brokers.

Read the full Q&A here.