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Rabobank Prime Broker FX

  • #1
  • First Post: Oct 24, 2011 12:44am Oct 24, 2011 12:44am
Every 12-18 months, I tend to research what is out there as my next step. In early 2010 I contacted Barclay's to see if I can tap into their liquidity and it was indicated I need about 2-3M in equity, which I did not have... DB Autobahn was even steeper.

Now we have late 2011 and I am armed with better equity and first hand experience of DMA trading using CFH Markets. I talked to some prime brokers to see what is out there, and I am not sure what to make out of it.

E.g. I talked to Morgan Stanley and I was not all impressed. Lots of red tape and their cost was not spectacular (1-1.5p on EURUSD, with lots of "let's see how it goes" during the discussion). About 0.5-1M would get me started there, clearly showing the shift in the PB FX marketplace, i.e. making it more accessible to non-institutional entities.

Talking to Rabobank FX Prime Brokerage division was more interesting. 0.5M to start, again showing the willingness of banks to take on the new breed of clients. Appears flexible and after the description of my trading style, they agreed that EBS Prime liquidity would be best fit. EBS Prime has decimal pricing (finally!) so that would be OK, but again, spread around 1p. Commission about $6-4 per million, depending on volume. $4 was based on 15 yards or so per month. So my overall cost would be about 1.1-1.2p per EURUSD trade. It is not bad, of course, but it did not left me speechless either. I get similar cost with CFH and Oanda and I can get the size I want (10mio per ticket), slippage is minimal and overall it works for me. Of course, having money with Rabobank in the name of my corporation would be very much welcomed, but both CFH and Oanda have, or will have similar solution.

To sum up, I am not completely urged to switch to a prime broker, perhaps because I fail to see the tremendous benefit. Yet it is the next logical step up. But I am hoping to achieve better costs, ideally in 0.8p range, all costs factored in (raw spread + comms).
Note: I know that there are brokers who post EURUSD spreads below 1.0, but I am referring to filling tickets of 10mio or more, reliably and with fast execution and preferrably in one price (on top band).

It would be good if someone with long experience with Prime Brokers and low cost trading can comment on this?

Raven
  • #2
  • Oct 24, 2011 1:14am Oct 24, 2011 1:14am
Hi,

Just keep me posted if you have any updates from PB's or leads from any members here. Even thoughcurrently I don't control enough capital to go with PB's, I would definitely be interested in a year's time.
Any updates that you could share (as you have done so in the past) would be appreciated.

Thanks and Regards.
  • #3
  • Oct 24, 2011 8:52pm Oct 24, 2011 8:52pm
Rather than speak to 1 prime brokerage place, why not contact some aggregators like integral or I think ?PureFX? the theory being with the multiple feeds you get the best price being offered which should reduce the overall spread....
  • #4
  • Oct 27, 2011 9:40am Oct 27, 2011 9:40am
Raven,

Don't know what kind of ammunition you've got but unless you trade with more than 80M (on the majors, less on exotics) in a click, there is no need for a PB. At the PB level you will get the best liquidity available, make sure you use it. Otherwise you will be wasting money paying fees for a benefit you don't use. It's like buying a Ferrari and only use it for grocery shopping.

As far as the spread goes, 1-1,5 pip (EUR/USD) is average (big sharks can negotiate it down a bit further). At this level it's more about the quality of the fills than the spread. Don't get caught up on the 0.6-0.8 retail spread, the spread is only a small peace of the puzzle when you trade with real size. You would much rather have a 1.2 spread and good fills than a 0.6 spread and fills that measures 7.2 on the Richter scale.

These brokers might be more suitable for you in terms of low cost/ good execution:
Baxter
vCap
Marex
LCG (london capital group)

LCG and Marex have on average 0.6p spread (EUR/USD), commission is 14$/M traded (LCG). Good fills up to 80M on majors should be no problem with either of these brokers ( don't take my word for it, do your own research).

If you don't like the idea of having your money with your broker, put the money in your bank account and trade using a bank guarantee.

// BBC
Get rich or die trying
  • #5
  • Oct 27, 2011 8:46pm Oct 27, 2011 8:46pm
Thank you for your feedback.

I do not mind paying access fees for EBS or any other liquidity pool that reduces my overall costs. I perform ton of statistics all the time and seamingly small differences make a big difference at the end of the trading year. I am no longer afraid to talk to PB's as I know I can deliver, but I need them to deliver as well.

Coincidentally I tried Baxter, LCG and Marex last year, I am fortunate to have good contacts who worked for Currenex... LCG and Marex are big on Currenex and I was not impressed with their liquidity. They can possibly connect to other liquidity pools, Baxter certainly can, including EBS. I am not going to elaborate on pros and cons of Currenex trading, as there are other threads dedicated to this subject. My take on CNX is that I am not touching it. I do not have experience with vCAP.

That said, Rabobank should have excellent network of counterparties on EBS, I would make uneducated guess that more so than Baxter due to their AAA bank position. Thus I am still interested in getting sub 1p spreads, but better sub 0.9p or even 0.8p including comms. It is out there, but we need to get it. I get pretty good deal with CFH and can negotiate even better, possibly. As you noted, it is about getting reliable, instant execution on large size... vast majority of ECN's and other brokers discussed on FF forum do not come anywhere close. With large size, most of these brokers cannot deliver. This is the sole reason why I am not accepting 1-1.5p as a "good enough" standard, and yet I would avoid any small player... I could not care less if they can give me my first 1mio on top band at 0.6p. As you said, the rest would be done on 7.2 Richter scale.

There were times when I thought that $14 or $15 commission per mil is good... I was naive. With volume and size, new horizons open up. Again, LCG looks small in comparison with the real heavyweights and this is one of the reasons why I passed on them last year.

You are right, spread is not the only part of the equation, but along with slippage (which more or less translates to available liquidity), it is what drives my cost. Monthly fee is a drop in the sea...
This is why I want Ferrari, because I will use it to my benefit. I want excellent spreads with high liquidity. By default, most entities that can provide such a configuration will give me segregated account (in the name of my corp). Bank guarantee is an option too, but at this stage I want the whole deal.

So the search continues, I have time... as I said before, I am happy with my current liquidity stream, but there are better deals out there. I will visit some entities in the know in 2012 in London and should have more tangible information that is not based on what someone heard or thought (no offense to anyone).

Raven

Quoting Bbc
Raven,

Don't know what kind of ammunition you've got but unless you trade with more than 80M (on the majors, less on exotics) in a click, there is no need for a PB. At the PB level you will get the best liquidity available, make sure you use it. Otherwise you will be wasting money paying fees for a benefit you don't use. It's like buying a Ferrari and only use it for grocery shopping.

As far as the spread goes, 1-1,5 pip (EUR/USD) is average (big sharks can negotiate it down a bit further). At this level it's more about the quality of the fills...
  • #6
  • Oct 27, 2011 9:13pm Oct 27, 2011 9:13pm
So EBS is not good enough, and the usual ECNs aren't either. That leaves you with only single bank platforms - but wouldn't you agree, that when frequently trading really large size, anonymous trading would be the better option? (I'm sure a bank would tell you differently

I think what bbc meant was that a prime broker offers many services, and you appear only to need execution and clearing, but not stuff like global custodian service, reporting, administration, cap intro (which is on a pb level by and large useless anyways) and so on, yet they still carry the cost overhead for all that.
  • #7
  • Oct 27, 2011 9:44pm Oct 27, 2011 9:44pm
Quoting shrike
So EBS is not good enough, and the usual ECNs aren't either. That leaves you with only single bank platforms - but wouldn't you agree, that when frequently trading really large size, anonymous trading would be the better option? (I'm sure a bank would tell you differently

I think what bbc meant was that a prime broker offers many services, and you appear only to need execution and clearing, but not stuff like global custodian service, reporting, administration, cap intro (which is on a pb level by and large useless anyways) and so on, yet they...
I would not say EBS Prime is not good enough, it is still the most liquid ECN (I would think), especially if tapping into deep pool of many solid counterparties. I am just not familiar with it first hand, but there must be a reason why EBS is the heavyweight in this business. But on more than one occassion I heard that some PB's are now posing a real competition to EBS's offering... must be the reason why most big financial institutions are now rushing to establish PB FX departments.

Good point about PB and what bbc was making reference to, I do not need bells and whistles... only fast and deep execution and safety of funds. Makes me wonder if providers such as CFH, along with completely separated account are the best fit - they still offer anonymous execution and costs are very good. To be continued...
  • #8
  • Oct 27, 2011 10:01pm Oct 27, 2011 10:01pm
EBS is the biggest only due to historical reasons. Their technology is ancient (reuters is even worse). They have 3 servers (NY, London, Tokio) with weird routing logic in between them. Thats also the reason why they never really had real streaming quotes, because the 3 servers need to sync up (subject to change soon apparently). The best they could deliver (at a huge premium in subscriptron costs - about 60K/month) were 100ms snapshots on their 'spot AI' program. Normal users on the gui get 250ms snapshots. It took them an eternity to introduce decimal quoting, albeit huge customer demand. But apparently liquidity is sticky - despite all the legacy tech. systems.
  • #9
  • Edited 1:18am Oct 28, 2011 12:56am | Edited 1:18am
Raven,

This is quid pro quo. As long as you have the monthly turnover (10-20+ yards) to back up your demand of 0.8 pip including commission (on majors), there should be no problems.

When you say Oanda will cut it as far as trade size go, your getting a PB for the sake of having a PB, not because you need one. 10M per click is not PB territory. It doesn't matter if you do 10 yards in monthly volume, as long as your average trade size is 10M you would be better of using LCG, Marex or vCap (they all offer EBS Prime and Fxall).You will get 0.6 pip spread (EUR/USD, London session), liquidity to easily fill a 10-70M order and with enough monthly turnover you will get the commission down to the low single digits.

Rabobank with their AAA status would be a good place to keep your money. However as a PB, I would take a look at UBS and Barclays (DB when you have a spare 25M in you mattress).

//BBC
Get rich or die trying
  • #10
  • Dec 21, 2011 3:52pm Dec 21, 2011 3:52pm
What is the leverage available at Rabo?
  • #11
  • Jun 10, 2012 8:35am Jun 10, 2012 8:35am
Quoting petr1029
I would not say EBS Prime is not good enough, it is still the most liquid ECN (I would think), especially if tapping into deep pool of many solid counterparties. I am just not familiar with it first hand, but there must be a reason why EBS is the heavyweight in this business. But on more than one occassion I heard that some PB's are now posing a real competition to EBS's offering... must be the reason why most big financial institutions are now rushing to establish PB FX departments.

Good point about PB and what bbc was making reference to, I...
I traded with PB since 2009, Rabobank as well, trading with Currenex, and Bloomberg. Kind of same set up of Raven. By reading Raven's posts, it seems I had very similar research and findings experience. Now I agree with BBC that PB is not always the right solutions, too much on boarding useless complexities and no real added value. Putting collateral with the broker is not a good idea either, but I agree with BBC that if you arrange the bank guarantee, that could be a good solutions. Which broker or ECN provider provides you with a solid platform and accepts bank guarantee rather than putting collateral with them?
Raven, why you are saying you don't touch Currenex? What is your current set up, if you dontmind sharing.
I am running a small prop desk where we trade both fx and futures and I am seeking a solid set up without incurring into useless on boarding processes which nowadays are becoming time consuming. We currently use the single bank platform of the prime broker.

To respond to the question on Rabobank leverage, it Should be 30x collateral but intraday and overnight are different. The LPs mirror whatever leverage you have with the PB.

Hotspot FX as a prime provider usedto have 33:1 policy.

Thank you for any feedback.
  • #12
  • Jun 13, 2012 9:55am Jun 13, 2012 9:55am
Quoting TheTrend
I traded with PB since 2009, Rabobank as well, trading with Currenex, and Bloomberg. Kind of same set up of Raven. By reading Raven's posts, it seems I had very similar research and findings experience. Now I agree with BBC that PB is not always the right solutions, too much on boarding useless complexities and no real added value. Putting collateral with the broker is not a good idea either, but I agree with BBC that if you arrange the bank guarantee, that could be a good solutions. Which broker or ECN provider provides you with a solid platform...
The Trend,

London Capital Group (LCG) does accept bank guarantees from 250K and upwards. They provide the full range of platforms you would expect from a institutional broker, EBS, Hotspot, FXall, Currenex etc. It really depends on your specific needs. Are you a HFT desk that typically trade between 5-10M a click where the bottom of the order book isn't that relevant or do you take less but larger trades which would put a greater emphasis on sufficient liquidity to fill a 100M order ?

I've only been on their Currenex feed which frankly wasn't that impressive liquidity wise. I've compared their Currenex feed to my Hotspot feed provided by Baxter-FX (who doesn't provide any bank guarantees unfortunately) and while the spreads on the EURUSD where pretty much the same (average 0.3) the liquidity on Hotspot made their Currenex feed look like a retail shop. If deep liquidity is paramount, this isn't the right fit. Try their Hotspot/FXall/EBS platforms instead.

I would assume the reason Raven won't touch Currenex is due to the "last look" feature. The "last look" feature allows the broker to accept or reject trades, mark up spreads and distort liquidity. In other words, it's a great way for a dishonest broker to display better prices and deeper liquidity than there acutally is available.

Take a look at vCap FX and Marex as well. vCap provides an even wider range of platform than LCG. Minimum deposit starts at 250k and a monthly volume of 300M for Currenex, 500M for FXall and a minimum deposit of 1M + 1 yard monthly volume for Hotspot access. You'll have to inquire yourself about possible bank guarantees.

If anything else, let me know.

Trader915
  • #13
  • Jun 13, 2012 10:07am Jun 13, 2012 10:07am
Quoting Trader915
The Trend,

London Capital Group (LCG) does accept bank guarantees from 250K and upwards. They provide the full range of platforms you would expect from a institutional broker, EBS, Hotspot, FXall, Currenex etc. It really depends on your specific needs. Are you a HFT desk that typically trade between 5-10M a click where the bottom of the order book isn't that relevant or do you take less but larger trades which would put a greater emphasis on sufficient liquidity to fill a 100M order ?

Trader915
Do you think they can't fill 10M a click without widening the spread? What do you think will it be in average? More then 1pip?
  • #14
  • Jun 19, 2012 12:07pm Jun 19, 2012 12:07pm
Quoting Trader915
The Trend,

London Capital Group (LCG) does accept bank guarantees from 250K and upwards. They provide the full range of platforms you would expect from a institutional broker, EBS, Hotspot, FXall, Currenex etc. It really depends on your specific needs. Are you a HFT desk that typically trade between 5-10M a click where the bottom of the order book isn't that relevant or do you take less but larger trades which would put a greater emphasis on sufficient liquidity to fill a 100M order ?

I've only been on their Currenex feed which frankly wasn't...
Trader 915,
Thank you for your message.
We are working on the LCG option after your email.

Yes the depth of the book is not so relevant, but quality of fills for 5-10m trades is essential.

Although we would rather trade with Hotspot, LCG said that their liquidity on Currenex is better. I will insist.

Regards

TheTrend
  • #15
  • Jun 19, 2012 12:37pm Jun 19, 2012 12:37pm
LCG for some reason always pushes their currenex over the other platforms. But they can set it up so that you have access to multiple platforms simultanously. Its even possible to enter a trade for example on currenex and exit on hotspot. It will be netted out EOD on the prime broker level (which is JPM by the way).
  • #16
  • Jun 19, 2012 12:56pm Jun 19, 2012 12:56pm
Does anybody heard about BNP Paribas new toy Cortex FX ? I am trying to get some info but seems its only for highly elevated ones ?
all is eternal - this is good news for people who loves bad news
  • #17
  • Jun 19, 2012 10:07pm Jun 19, 2012 10:07pm
If you are not a fund/company, HNWI only.

The playground is changing with the FX market slowly becoming more transparent.

FXCM & Credit Suisse announced a joint ECN platform.

Barclays, BNP Paribas, Deutsche Bank, RBC and UBS will launch the TraFXpure platform together.

Changes are coming...
  • #18
  • Jun 19, 2012 11:31pm Jun 19, 2012 11:31pm
Quoting CaymanTrader
Changes are coming...
for the worse...

It's the old divide and conquer, banks don't want a centralized plainfield like in the futures....
  • #19
  • Aug 21, 2013 3:52pm Aug 21, 2013 3:52pm
1) Do they all provide direct access to tom/next swaps? I'm kind of tired of getting reamed by brokers marking up the tom/next swaps when I'm generally trading in standard MM sizes.

Interactive Brokers has great spreads of around 0.5 pips - 1.0 pip on majors but absolutely horrendous swap rates for customers, e.g. AUD/USD nets you about 0.6% when the spread should be closer to 1.6%. They don't actually have FX specific swap rates, and pay/charge the same amount for equity balances as they do for fx balances.

2) At ~1 yard a month and ~$500k equity, would a place like Marex bother with me?


Are any of these guys multi-commodity? I would rather move everything from Interactive Brokers than split FX out from the rest.
  • #20
  • Aug 21, 2013 5:14pm Aug 21, 2013 5:14pm
Marex, sure. The bulge bracket banks, no. It used to be different pre-crisis, but most of them wont deal with individuals at all anymore, not even HNWI. They are way more selective nowadays. Newedge wont either.
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