Before co-founder and group chief executive Carlo Kölzer launched 360T in July 2000, he pitched the business idea to German airline Lufthansa at its offices in Frankfurt. Lufthansa soon became 360T’s first client, alongside its first liquidity provider, Dresdner Bank. Over the past 13 years, the platform has expanded to the point where it now has 100 liquidity providers and rising trading volumes.

While it might make less noise than some of its competitors, 360T has been gaining ground in terms of both client and product coverage. Headquartered in Frankfurt, the firm operates in roughly 60 countries today, with offices in New York, Singapore, Mumbai and Dubai. And while many foreign exchange platforms saw their volumes fall last year, volumes rose on 360T.

“Volatility being very low in 2012 did hit us to a degree, but we still continue to grow year-on-year, and even in 2012

we grew about 25%. This year we have seen a strong pick-up in volumes. In the past few weeks, we traded about $50–55  billion notional a day in FX and $25–30 billion in time deposits. Over the course of last year we averaged about $46–47 billion notional a day in FX,” says Kölzer.

The volume figures – usually not disclosed – are clear evidence of a growing platform, but 360T still trails behind FXall, widely seen as its main competitor. FXall has seen substantial growth over the past year; its average daily volume last month hit $110 billion, the highest ever recorded, coming close to the average daily spot volume of $137 billion on Thomson Reuters and EBS’s $149 billion.

But 360T has quietly crept ahead of Hotspot FX, the only other publicly reporting venue, which traded $27 billion on average in January – the figures for February have yet to be

reported. Looking back on last year, Kölzer believes 360T’s distinct client base was a key factor in driving its volumes higher when other platforms suffered.

“If you compare us to EBS, for example, that is a pure interdealer spot platform,” says Kölzer. “It might be that the risk appetite of participants on one side went down, and the lack of volatility hit them harder than us because our participants are made up of a significant number of corporates. They are not as sensitive to volatility as proprietary traders. On top of that, we still have a strong forwards and

Spotlight on...

Forex multibank platform 360T has expanded in recent years and now trades average daily volume of $50–55 billion, but chief executive Carlo Kölzer sees room to grow further. He talks to Robert Mackenzie Smith

Carlo Kölzer, 360T

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swaps business, which isn’t really affected by the lack of volatility.”

Focusing mainly on corporates, and now an increasing number of institutional asset managers, 360T has grown almost in parallel to FXall, which was established at the same time. Unlike FXall, 360T has so far remained independent of larger entities in the FX market, although private equity firm Summit Partners acquired a majority stake in the company last year, dubbed a “growth equity investment”. 360T’s management team, led by Kölzer, retains the second largest stake in the business.

“At the moment there is no obvious reason for us to go into a merger. On the one side there is consolidation, but on the other there are still new platforms being developed all the time. These are two different trends occurring in the market at once, but we are staying firmly in the middle,” says Kölzer.

Meanwhile, 360T continues to pursue new business opportunities. Earlier this year, the firm licensed technology from Fenics Software on its Tex platform, allowing it to compete for market share in FX options, which will be required by forthcoming regulations to move to multibank platforms. The platform has also expanded its product set over the

years to include non-deliverable forwards (NDFs).

“NDFs and options are strongly increasing on our platform. I’m not convinced the anticipation of regulation will affect volumes in these products; it might just be that these currencies are playing a more important role in the global economy and are becoming more interesting to the trading environment, certainly for NDFs. So far it has been more the attraction of the currencies than the anticipation of regulation, with the rupee, real, renminbi and South Korean won the main traded NDF contracts on our platform.”

Having stuck firmly to the corporate sector when it was founded, 360T expanded into the market-taking bank community in 2006, and for the past two years has focused on expanding to asset managers, macro funds and retail brokers. But despite the changes, some banks complain about the platform’s pricing structure, which charges fees only to liquidity providers – a model some claim is antiquated.

“Multibank platforms rely on liquidity providers, so it would only make sense to share the cost burden with the end-users. It’s something we would certainly support, and it’s something we’ve never

fully understood; that being the liquidity provider, you also have to pay the brokerage charge. That business model was structured 15 years ago, so perhaps it’s a little out of date. Good liquidity has a price, so it’s right that the industry looks into this,” says the head of FX sales at one European bank.

But 360T has no plans to change its fee structure, says Kölzer. “There is no policy change and the pricing structure will remain on the bank side. We do not have plans to change this is in the near future. There has been price compression in the market, which has put pressure on the banks, but the important factor to focus on is profitability, and 360T is working closely with the banks in dedicated workshop studies to examine all areas where the banks can increase their profit margin.”

Throughout this year and beyond, much of 360T’s strategic focus will continue to be on Europe. Kölzer estimates that 70% of the firm’s business is done in Europe, with the remaining 30% split evenly between the US and Asia. “Historically, Europe has been where the majority of our business has been transacted and it is still our strongest geographical area,” he says. FX

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Spotlight on... Carlo Kölzer, 360T

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