Marex Spectron focuses on clearing clients

Customer assets held by Marex Clearing Services, the clearing arm of British broker Marex Spectron, have grown to more than $3 billion (£2.2bn) with the integration of Chicago-based futures commission merchant Rosenthal Collins Group (RCG).

According to Marex’s head of clearing Thomas Texier, the RCG deal, which closed in February 2019, has contributed to meaningful growth in the group’s clearing business to over $3.5 billion in customer assets.

The acquisition added Chicago to Marex’s North American footprint and expanded its US clearing offering and agriculture business, bringing 14,000 client accounts and balances along with 150 staff.

“RCG are now fully integrated with our structure, and that means we can really make use of their capabilities,” Texier said.

Texier, who joined London-based Marex as head of clearing from R.J. O’Brien in July, was speaking to Global Investor after the clearing service won FOW’s Client Clearing Provider of the Year for the second consecutive year.

Marex launched the division in late 2019 after moving larger clients across and closing its Pro Trader division. Smaller accounts were transferred to long-term clearing client TTG Capital.

“Clearing is not a new business for Marex,” said Texier, “but creating a clearing services division really focuses our efforts on service towards the clearing customers. We have a dedicated clearing support infrastructure that interacts with all the traditional divisions of Marex, and we work alongside them to facilitate interaction for clearing clients.”

The division plays a key role in the group, Texier said, as it consolidates and advances the broker’s clearing offerings. One of the firm’s fastest-growing areas, it offers global connectivity and infrastructure, end-to-end clearing and execution services and global, 24-hour coverage.

Setting up the service turned out to be more timely than Marex originally envisaged, as it became instrumental in supporting clients as they navigated the challenges of Covid-19 market turmoil. Against this background, the group achieved record first half results with net revenues up 28% year-on-year at $219.9 million and profit before tax up 48% to $38.2 million.

“In 2020, every single person in the financial services industry and probably the world learnt to work from home,” said Texier. “The focus had to be on risk management for the first half of the year because the market was so volatile.

“We were able to protect our clients and equity by charging the right level of margins. We worked closely with them to manage their risk and the increased volatility throughout the Covid-19 pandemic. This ensured there were no significant defaults or risk management issues.

“It’s a testament to our risk functions and front office management that we navigated the crisis and came out stronger as a result.”

Currently, Marex is in a growth phase based on three key pillars: acquisition and product diversification, growing its sales team and technology investment.

The broker remains resolutely committed to expansion at a time when several competitors are conducting strategic reviews of their clearing activities and wondering if they are still relevant, Texier said. This is largely due to the loss of interest rate income, particularly in US Dollar deposits, which has dented profitability and resulted in the need to adjust client models.

“We see some client dissatisfaction in the market over their current vendors, and they are asking us if we can service their business. For Marex it’s a core business: We are definitely in this market, we intend to remain, and we want to gain market share.”

To that end, the RCG acquisition was transformational as it added Chicago to Marex’s US footprint in New York, Calgary, Connecticut and Houston, as well as grains and livestock to its agriculture business which traditionally focused on sugar, cocoa and coffee.

The acquisitive phase continued in 2020 with agricultural brokerage team the Matthews Group, recycled metals trading firm Tangent Trading and BIP Asset Management, an equity and commodity options market maker.

Then, in November, Marex acquired X-Change Financial Access (XFA), the US agency broker focused on equity and other exchange-traded derivatives linked to equity indices and interest rates.

Adding XFA brings an opportunity to expand further in North America and develop new financial derivatives asset classes, as XFA specialises in financial products traded on CME Group and Cboe Global Markets.

In December, Marex secured approval to become a trading privilege holder of Cboe Futures Exchange, which lists volatility and corporate bond index futures, and a clearing member of the Options Clearing Corporation, the sole clearer of US equity options.

“Traditionally Marex has been strong in commodities and energy. Oil and ags are areas that we are growing very actively at the moment,” Texier said.

“Separately, we are also growing in new asset classes that Marex has historically never been known for, these are financial products and equity derivatives in particular.”

Marex has also achieved growth through multiple senior appointments, including Texier and Chicago-based Peter Ceko, who joined as executive VP from ED&F Man. This was part of a significant expansion of the Chicago team, which included the hiring in July of former JP Morgan and Goldman Sachs managing director Ram Vittal as chief executive of Marex Spectron North America.

The third pillar of Marex’s growth strategy lies in developing its technology and infrastructure, which provides connectivity and clearing services to 37 global exchanges and the majority of central counterparties in North America and Europe.

Currently, Marex is in the first phase of adding a dedicated clearing platform for clients to NEON, its bespoke front-office platform covering the global commodities and financial exchanges. The platform has already undergone significant enhancements including a new interface providing a single-entry point-of-access to Marex’s services.

The company is also modernising its back-office technology, starting with the transition last year of its legacy platform to XTP. This enables clients to visualise their clearing activity in real time as well as bringing improved processing times and other operational efficiencies. The platform is already live for North American clients, and Marex expects to complete the roll-out to the rest of its client base in early 2021.

Another key development this year will be the integration of Marex and XFA, Texier said, as the broker moves beyond commodities into financial derivatives.

“One of the big plans is to interconnect the two companies to give all our clients access to the XFA markets and technology. It’s a new asset class and this is definitely an area where we want to develop our presence.”

For more information on Marex Spectron’s clearing services contact 0207 655 6000 or marex_clearing_relations@marexspectron.com