FNG Exclusive Interview… After we reported last week that CMC Markets had rebranded its institutional B2B FX arm as CMC Markets Connect, we thought it would be a good opportunity to speak to the man behind the business, CMC’s Group Head of Institutional Richard Elston, and find out more about the rebrand and what’s ahead.

Did CMC ever consider an “independent” brand name and identity for its B2B unit?

What’s changing, and challenging, in today’s world of FX and CFD liquidity?

How has the “COVID era” changed the business?

We posed these questions and a whole lot more to Richard Elston. Here is what he had to say.

FNG: Hi Richard, and thanks for joining us today. Please let us know a little more about the decision to rebrand CMC’s intuitional business as CMC Markets Connect. (By the way, did you ever seriously consider a totally separate branding from CMC itself?).

Richard: Over the last thirty years, we have been building CMC Markets on a simple principle: providing clients with a world class trading experience through market leading technology. We’re now a global brand spanning both retail and institutional markets, with B2B becoming an ever more prominent focus for us. Our new brand marks a ‘stepping-up’ at CMC where we can develop new products, alongside the highest quality pricing and execution services, enabling us to work with an even wider variety of institutions.

To answer your question on developing a completely separate brand, this was never a route we were looking to go down. By keeping our institutional business under the CMC Markets umbrella, we can leverage from the significant brand awareness we already have globally. We have built a respected reputation based on our heritage, regulatory framework and strong balance sheet. That all remains very much part of the package, but CMC Markets Connect provides the invaluable delineation between our institutional and retail offerings.

FNG: What challenges are institutions – and specifically FX/CFD brokers – facing today in sourcing liquidity and in risk management? How does CMC Markets Connect address those challenges for your clients?

Richard: There are two key problems in terms of sourcing liquidity – and by virtue managing risk – for brokers today.

Firstly, you have that legacy issue caused by tier one banks being more selective in terms of who they are willing to trade with. Markets evolve and various solutions have been found here in recent years, but the new challenge which surfaced at the height of the COVID pandemic in the early part of 2020 was the risk of price dislocation in disorderly markets. In a recent research we published we saw 45% of respondents stating they had used alternative liquidity providers during this time. The extreme levels of volatility meant some well-established liquidity providers were either unable to continuously quote two way prices at all, or at least do so at a commercially acceptable spread. However a small number of LP’s – and I include CMC in this – were suitably positioned to maintain a price throughout, in our case due to the bolstering effect of our own retail flow.

It’s situations like this which make it important to elevate our institutional brand – we’ve been working in the B2B space for some years, so the launch of CMC Markets Connect simply amplifies the message that we can now act as a genuine liquidity maker.

FNG: The “COVID era” has been one of prosperity for the online trading sector, but we’d imagine it hasn’t been easy to manage through it all. How has it been managing your business over the past year, especially as it has grown? What do you see as the “new normal” at CMC once we get the virus under control?

Richard: Where we had relationships in place already, it wasn’t too difficult to progress and close out conversations, but being unable to travel has made it that sales people across all industries have had to become more creative in their approach to growing new business. As a technology driven organisation, we managed the move to remote working very well and the institutional team quickly adapted to the new normal, especially when it came to navigating clients through the turmoil seen in March and April of 2020. That’s being played out in our numbers – as we enter the last trading quarter, growth of both retail and institutional clients remains exceptionally strong.

It’s too early to say what the landscape will look like once the dust settles, but it seems inevitable that there will be a reduction in global travel, limiting the ability to meet face to face and instead seeing the adoption of a hybrid model. Our global footprint certainly helps us well here, but for now it appears that Zoom calls are here to stay.

FNG: How do you see the competitive landscape for liquidity and services to FX brokers changing lately, and in the near future?

Richard: There’s the ongoing movement to diversify across asset classes – that trend is already established, but it still has further to go. We’re now offering access to over 10,000 different instruments, including single stock CFDs and access to a range of cryptos, and we’ll continue to expand this range as needed. It’s important to remember that counterparties shouldn’t be assuming they have to offer the full range themselves, but we know that there’s a general move to consolidate the number of service providers used, so we want to ensure we can address every need.

On that theme of consolidation, the availability of value-add consultative services will also be a key differentiator. Liquidity providers are facing off to a wide range of counterparties, from large multinationals down to start-ups, so having the scope to work with these entities in a holistic manner – as we do at CMC – will offer a commercial advantage.

Technology is also a key point of differentiation. As well as providing a wide range of instruments, there’s an expectation that orders can be filled both at scale and with minimal latency. Again, this is going to be a point where those with access to significant internal flows as well as other sources of liquidity stand to gain an advantage. Those reliant on off-the-shelf solutions maintained by third parties are likely to leave themselves at a disadvantage.

FNG: What else can we expect to hear from CMC Markets Connect in the coming months?

Richard: Look out for a whole raft of product developments.

The launch of CMC Markets Connect means that we’ll be putting the institutional offering at the centre of the business, but the way this will develop stands to benefit our retail customers, too. We have always targeted a sophisticated investor audience and they will also benefit from our improved price construction and broadened product offering.

Ultimately, by shifting to designing for institutions first we are confident this will be a win-win for all of our clients.