Small but muscular Altura Markets has always known that keeping abreast of technology and regulation was going to be critical in exchange-traded funds. Sverre Hasvold, managing director (right), explains how the Spanish leaders continue to lead the way in derivatives.
Congratulations to Altura Markets for once again being voted as Spain’s number one derivatives broker. What do you think are the key elements behind your success?
Sverre Hasvold: I believe we succeed because we are a small company that focuses on the job we do best. Our concern is to execute and clear derivative products through exchanges and central clearing counterparties, and I’m proud to say that we do that job very well for our clients. But, even though we are a small and very specialised company, in the financial industry today it is also very important to have muscle – that is, powerful financial backing that allows financial services to be provided securely and on a large scale, in order to reduce costs. State-of-the-art technology and a low financial risk environment normally come at a high cost, and we have our partners and shareholders BBVA and Societe Generale to thank for providing us with this at a competitive price level.
To what extent is staying ahead of the regulatory curve essential to the success of brokerages?
Sverre Hasvold: Not rising to the challenge of increased regulation is not an option. The risks of non-compliance are too serious for us not to have regulatory experts on board. Firms that fall behind in their compliance efforts could be at a competitive disadvantage, and customers will not want to deal with brokers that could expose them to reputational damage. Our two shareholders offer us the capabilities and resources to stay at the forefront of regulation.
Prolonged periods of low interest rate volatility are rarely good news for brokers. How do you maintain volumes when markets are becalmed?
Sverre Hasvold (left): Volumes in short-term interest rates have declined drastically, and we think that they are going to stay low for some time. Fortunately, our clients are more actively trading other asset classes that offer them interesting risk/return alternatives and more volatility, such as equity, foreign exchange and commodities derivatives. Investors are more cost-conscious than ever with their trading positions, and listed futures and options are the cheapest way to access the markets.
2015 was a banner year for equity derivatives in Europe, as market participants sought to take advantage of a quantitative easing-fuelled boom to EuroStoxx in the first half. How did Altura capitalise on this theme?
Sverre Hasvold: In the second half of the year, clients hedged their portfolios when markets went lower. We believe that index options will continue to be the most popular hedging tool for asset managers, and we have also seen a higher demand for strategies with dividend futures and single-stock options (called overwriting). Clients are using more sophisticated trading strategies to improve their benchmarks.
What electronic products and services that Altura offers have seen the greatest take-up from clients?
Sverre Hasvold: Clients are clearly going electronic and are connecting to Altura via Financial Information eXchange (FIX), or independent software vendors. Customers are requesting full straight-through processing (STP) from front to back in order to minimise human errors and increase efficiency. The largest take-up from clients has been the new suite of algorithms that we are able to offer for listed derivatives, and the quality of the execution of client orders has never been better.
Altura maintains a workforce to act as consultants for clients and provide tailored services that electronic platforms may be unable to offer. What is the future of voice broking in today’s market?
Sverre Hasvold: We have always considered Altura a technology provider because we have been a pioneer in Spain, offering exchange-traded STP solutions for our clients in execution, clearing and e-solutions. When Altura started out 15 years ago, we were convinced that technology was going to be key in exchange-traded products and we have been loyal to this principle. But, although clients are going electronic, there will always be customers that prefer voice execution (care orders) – the clients decide how they want to access the markets, and we are ready to meet both demands.