Celebrating its 20th anniversary this year, Danish player Saxo Bank has come a long way since its humble beginnings. It is now recognised internationally, while the outlook for further triumphs is definite. The most important aspect of the bank, and the secret behind its success, is its forward-thinking approach – the bank’s online trading platform has long been the awe of its competitors, while it is also the brain behind the world’s most comprehensive equity trading platforms. Today, the Danish contender delivers trading platforms to more than 100 financial institutions and white labelling makes up almost half of its burgeoning business. Despite the success, the bank continues to work hard to invest in new technologies to meet ever-rising client demands. Saxo Bank’s CEO Kim Fournais explains how he and his co-founder, Lars Seier Christensen, plan to bring the bank to the next level.
Saxo Bank celebrates twenty years in business in 2012. What have been the milestones in the bank’s development over the past 20 years?
Much of our development has been driven by the need to differentiate ourselves as a small bank in a market where most of the players are large financial institutions with solid client bases. We basically wanted to build a brokerage with a clear focus on customer service and our adoption of the internet at an early stage was a great opportunity for us to achieve this goal. We invested a lot of energy and resources in developing an online trading platform while many in the industry believed that internet trading wouldn’t take off. The fact that we were first-movers helped spur our growth and the launch of our trading platform was a milestone although the real traction began after 2000. We began to receive requests from larger, older financial institutions that were not natural counterparts for us, interested in reproducing our online trading platform for their own client base. The realisation that our technology could be used beyond our own client base was a very important milestone for Saxo Bank.
Can you describe your white label business?
Our white label solution is built around a customised version of Saxo Bank’s platforms branded under the client’s name, typically a licensed bank. Saxo Bank offers the technology, knowledge and infrastructure to enable clients to enter or expand in the online trading market. Saxo Bank’s white label solutions provide clients with integrated front and back office infrastructure, real-time risk management, client base development tools, dedicated services and go-to-market strategies to help clients develop their business.
How significant would you say your white label business is today and how has it developed since your first white label client?
It’s a crucial part of our overall business model and the long-term nature of Saxo Bank’s white label relationships are a testament to the value of the business. Today, Saxo Bank delivers trading platforms to more than 100 financial institutions and white labelling makes up almost half our business. That is also why we recently increased our focus on the institutional client segment and added a number of new white label clients across the regions. We also increased focus and resources aimed at growing business with investment managers, private banks and funds. Saxo Bank’s multi-asset platform and the access it provides to a large number of global markets are key features for this client segment.
What are the biggest challenges for you and your white label clients today?
The overall challenge for the industry is that client expectations are going up but profit margins are going down.
How can the industry handle this challenge?
It’s basically about making clients happy. We need to continue investing in new technology to meet the ever increasing demands of the clients. The next generation of traders want to be able to see all positions, open orders, read news, carry out simple charting or view their account status anytime, anywhere, and because trust in the industry has dwindled since the 2008 crisis, I believe they would also much rather get advice and ideas from their peers, such as a community of other traders and investors rather than from the traditional financial adviser. Furthermore, investors require not only more information but also superior information that is easily accessible to enable them to make the perfect trade.
Transparency and self-empowerment are mega trends. The rate of technological change is estimated to double every decade going forward and technology is improving and developing constantly to support the two mega trends. The priority for any trading and investment organisation must therefore be on developing the Intelligent Platform that truly increases the value and relevance of the information it makes available to its users.
What kind of information do we need that we haven’t already got?
As we see it, clients want more transparency. Ever more aggressive definitions of insider information, making use of non-public information of any nature, is becoming less attractive and forcing continuous knowledge improvement of all market participants. We have taken an active role in bringing higher market and product transparency to the online financial services industry.
In 2011, Saxo Bank began publishing market data from the FX Options OTC market three times a day on Tradingfloor.com. This initiative allows our clients to improve their understanding of trading FX as an asset class. Furthermore, the initiative signifies Saxo Bank’s position as a market maker in the interbank OTC markets. The published information includes ATM volatilities, which show the change in volatility of currency pairs, 25-Delta Risk Reversal, which is the most widely-used parameter in gauging market direction, but also OTC Volume index which is based on interbank OTC FX Options trade activity, and a range of other features.
We also started reporting our contract for difference (CFD) trades via the trade reporting platform Markit BOAT. Saxo Bank was the first financial institution to report our single stock CFDs trades on a voluntary basis providing non-listed CFD trading with the same transparency found in the trading of listed financial products.
We have also begun publishing our historical FX stop order slippage on saxobank.com. The historical FX stop order slippage information details Saxo Bank’s performance in filling client stop orders on the major currency pairs.
And finally, in October 2011, we began to publish FX open positions on TradingFloor.com. The FX open positions module provides a snapshot of Saxo Bank clients’ aggregated FX open positions on 10 major currency pairs, allowing users access to historical positioning across and within currency pairs. The module can also be used to search for extreme positioning in particular currency pairs or for concentrations of positions that might result in support or resistance.
Mobile trading to continue its rapid growth
By Jesper Brigsted Laursen
Product Manager – Mobile Trading Applications, Saxo Bank
Saxo Bank was one of the pioneers in both online trading and mobile trading and we have continued to build on our expertise in this area by investing extensively in new technologies in order to provide clients with an advanced online trading and mobile trading platform.
While we are proud to have democratised the market by providing a more transparent online service that can handle smaller trades and give better pricing for customers, today, we firmly expect mobile trading to continue its rapid growth. More and more traders are acquiring advanced mobile devices such as smartphones and tablets. Additionally, we also expect increasingly advanced functionality from the desktop platforms available on those mobile devices.
Saxo Bank’s complete integration between our award-winning desktop platforms Client Station and WebTrader as well as the MobileTrader, has enabled us to offer a consistent and highly efficient trading experience, regardless of whether it is utilised on the desktop, laptop or a mobile device. A major focus for us, in developing our new mobile trading platform, has been to ensure that the client’s transition from the desktop to mobile trading is seamless and intuitive.
In the mobile landscape today, we are seeing an increasing degree of fragmentation compared to the desktop trading experience. Not only are there several alternative mobile platforms commanding a significant share of the market. Device capabilities vary greatly, from smartphones to basic feature phones which still account for a large share of the market. Adding further complexity, many of these mobile manufacturers are established not only as a viable mobile phone manufacturer but as a tablet manufacturer as well.
With this in mind, being able to deliver a world class, multi-product, mobile trading experience that not only utilises state-of-the art technologies, but also intelligently adapts to the preferences of the client in terms of device type and form factor is an achievement in itself. Having one codebase that caters to all mobile form factors enables Saxo Bank to introduce both feature and product updates on the platforms at a rate unmatched in the industry. This is a truly unique functionality we are very pleased to be able to offer to our White Label Clients.
We are thrilled to be receiving a World Finance award, which reinforces our confidence that we have a superior mobile trading solution coupled with the existing Saxo Bank infrastructure – that is unsurpassed in the market.