Why can’t retail brokerages up their standard? The passing of good quality firms and their talent is lamentable

Two years have now passed since CorrSight shuffled off the commercial coil. Why doesn’t the smaller end of the retail FX sector learn from this and evolve toward quality rather than churning?

tel aviv

In today’s highly advanced world of enlightened retail traders, and the long-established empowerment of small companies to reach a global market now very much here to stay, it is anathema that there are still trends toward zero investment in quality, and that the now ancient method of lead buying and hoping to convert to (very short term and small value) clients is still very much alive and well.

Since the inauguration of MetaTrader 4 some fourteen years ago, the ability for marketing-led entities with no prior experience in the financial markets or electronic trading sector to bring themselves into an international market place for less than $10,000 in platform and hosting costs, with no R&D and no ownership of infrastructure created a sudden rush of literally hundreds of white label-based small brokerages which relied on their owners’ digital marketing and lead acquisition backgrounds  to create immediate databases that were then called by sales teams.

This led to a subculture among the retail electronic trading fraternity, distancing the established British, American and Canadian firms with their own proprietary trading infrastructure and recent public stock exchange listings from the upstarts which had come from a different background altogether, many of which originated from Israel.

By the end of the first decade of this Millennium, Israel had garnered a very well deserved reputation for being a major center for the development of retail FX trading technology.

Indeed, there were not many actual brokerages, but the development and advancement of trading software, marketing tools and business analytics that had built itself around the MetaTrader 4-based brokerage sector had become very finely honed and had done so very quickly indeed.

As a world renowned center for technological development in the retail financial sector, FX brokerages looked toward Israeli high technology companies for added value tools, not just to help them market their product in an intelligent method and reach more customers, but also in terms of having an ability to streamline their business.

Here we are, almost a decade later, and virtually none of these companies still exist, and the progress made in terms of genuine cognitive consideration toward a better retail brokerage has been largely reduced to nothing and overshadowed by the fraudulent binary options and ICO disease that has spread across the commercial centers of Tel Aviv.

One particular casualty of this is CorrSight, which was a real time analytic vendor providing FX and binary options brokers proven solutions for higher conversion rates, larger trading volumes and improved in customer retention.

Hudi Zack – a scientist, technologist and cyber security expert

Founded in 2010 by three senior technologists, Eli Gur, Hudi Zack and Nir Yaffe, the company shuffled off the corporate coil just four years later.

Today marks two years since Hudi Zack, a Science Master in Electrical Engineering with his alma mater being from Tel Aviv University in 1991, moved on to become COO of cyber risk management software company Cytegic.

Following the demise of CorrSight, Mr Zack joined Verint (Verizon International) as Senior VP and Head of Cyber Business Unit, a position he held for almost two years before being appointed COO at Cytegic in February 2016.

Mr Zack’s partner, Eli Gur, is an equally highly educated professional, holding a Bsc in Physics, Mathematics and Computer Science from the esteemed Hebrew University of Jerusalem, graduating in 1987 before taking his Master of Science degree in Computer Science at the prestigious Bar-Ilan University in Ramat Gan, Israel. He is now CTO at RavTech, which builds mobile applications for enterprise purposes.

Mr Yaffe went on to join SpotOption, which pretty much highlights the direction in which Israel’s trading entities took.

Buying leads is obsolete and low level. There are far better methods

Far from living up to its “Startup Nation” reputation, Israel’s electronic trading output now is the subject of law enforcement agency censuring and lamentable behavior from villains that threaten physical consequences toward anyone who denounces their atrocious activities.

CorrSight is not alone. Although it no longer exists and some of its peers do, they have a hard time in attempting to change the mindset of the churn and burn attitude displayed by so many small retail brokerages.

In Cyprus, which is home to over 155 retail FX firms, our research shows that over 100 of them are only really interested in buying unqualified lead lists and eschewing all types of genuine business intelligence or targeted systems that would increase their revenues, improve their image and elevate their status through having a good quality client base.

FinanceFeeds is aware of so many instances in which marketing divisions of retail firms with less than 25 employees simply call media or advertising firms and ask for leads, or place CPA adverts in the vain hope for some quick conversions with very little chance of customer retention or valuable return on investment.

Every week, marketing divisions of retail brokerages put out banners offering huge leverage on cryptocurrency, (now illegal in many regions), or offering huge bonuses. Surely this is the stuff of pre-regulation gambling firms with no financial background or market connectivity?

There is no reason why proper onboarding of clients via good quality resources cannot prosper. For example, instead of trying to onboard gaming customers via almost useless CPA lead acquisition and not listening to companies such as CorrSight, or its rival CPattern which is still in existence and should be much more utilized than it is, firms should refine their methodology.

It is less costly and far more sustainable in terms of reputation elevation and client lifetime value to use good quality business intelligence.

Additionally there are podcast series in existence, especially firms like TwoBlokesTrading which has a following of 35,000 downloads per month, consisting of traders with actual knowledge in Anglophone nations including UK, Australia, New Zealand, Canada, South Africa and the United States. Podcasts of this quality engage proper traders and are ideal partners for good brokerages that can place their market analyst on the podcast and have their advertisements directed at a high quality and loyal audience that trusts this series rather than aggressively cold calling pay per click leads.

Dishonorable displacement

Post-trade processing firms such as Traiana, which is now part of Michael Spencer’s ICAP, originated in Tel Aviv, as did automated optimization tool Optimove, which was listed by Forbes as being one of Israel’s most ingenious startups ever.

Some of the world’s most renowned electronic brokerages were founded by Israelis, and have risen to become publicly listed firms in New York and London.

This accolade, however, no longer bestows itself on Israel.

Gil Mandelzis, CEO and founder of Traiana, graduated from Tel Aviv University in 1994 with a BA in Business and Sociology. Just six years later, he founded Traiana Inc, and became CEO, starting the company from nothing, and pivoted successfully through several business models to create dominant position in capital markets transaction processing. Grew business to $15M with 100+ employees in 15 countries, becoming renowned as one of the world’s most prominent post-trade processing companies.

Mr Mandelzis secured $40 million in venture capital from Sequoia Capital and sold the company to ICAP in 2007 for $250 million which became the subject of a Kellog Business School case study.

Where is Mr Mandelzis now? New York.

Pini Yakuel, an urbane young gentleman from Tel Aviv, completed his Master of Science degree at Tel Aviv University in 2007, in Industrial Engineering and Management before founding two technology startups, one being Mobius Solutions, the other being Optimove, which he founded in 2009.

One of Israel’s FinTech pioneers – Gil Mandelzis

The Optimove Customer Marketing Cloud is used by hundreds of brands to increase customer engagement, spend and loyalty. The software implements a systematic approach to planning, executing, measuring and optimizing a complete, hyper-targeted CRM plan.

Optimove consolidates, mines and models customer data, dynamically grouping customers into micro-segments, and forecasting their future behavior and value.

Just two years ago, Forbes pointed this technology out as one of Israel’s most promising among all high tech startups.

Where is Mr Yakuel now? New York.

Optimove is headquartered in New York, and is a completely American company.

Social trading has died a death. There is very little evidence of the large firms that used to dominate, and most of that technology came from Israel.

The only one in existence is eToro, which is a social investment platform.

Founded by young genius Yoni Assia after he graduated from Israel’s highest performing academic institution, the international “Interdisciplinary Center” in Herzliya, where he graduated with a Master of Science in Computer Science, Mr Assia was then a programmer in the IDF before founding eToro in 2006.

Whilst Mr Assia still resides in Israel and the company still has its base there, it is clear that China is where it is at for the company.

A combination of Mr Assia’s aplomb along with that of APAC CEO Jasper Lee, eToro embarked on a massive corporate venture with PingAn Bank to place the social trading platform within PingAn’s proprietary system, giving it a massive distribution channel across China.

I met with Mr Lee and also Lance Liu of PingAn Ventures which invested in eToro on separate occasions, in Guangzhou and Shanghai respectively, to look at this, and can deduce that eToro is pretty much a Chinese entity these days – and is doing very well indeed.

Andrew Saks-McLeod with eToro’s APAC CEO Jasper Lee on the Israeli company’s massive move toward China and its venture with PingAn

eToro has for many years trodden a very different path from its peers, and to great gain, especially in today’s post-social trading era in which separate platforms that provide social trading to retail customers whilst charging a license fee to brokerages have become extremely passe.

“eToro created a wholly owned foreign enterprise (WOFE) which is in the process of registration and is a fully owned subsidiary under eToro. The market here in China is less strict than it was before, and it is less hard to open in China as it had been previously, as long as there is government oversight and input” Lance Liu, Head of Investment, Ping An Ventures told FinanceFeeds.

An important aspect to bear in mind is that eToro has been operating for eleven years now, and has a completely globalized structure. “In China, the environment is completely unique” said Mr. Lee. “China is home to a huge potential client base, but localization is vital. eToro is a social platform so that people can communicate with each other, therefore to make our entry into China successful, we had to make a series of vital amendments such as the ability to be able to translate all the account details from English (which globally is the largest language base) in one click into Chinese” Mr. Lee told FinanceFeeds.

“There are sutble differences between Chinese platform functionality compared with that of other regions that had to be taken into consideration too. For example, Chinese traders see the up and down indicators in different colors to those offered on platforms ovesees. In China, if the market moves up, the indicator is displayed in red, wehreas if the market is going down, it is displayed in green which is the opposite of the rest of the system used in the rest of the world” – Jasper Lee, CEO APAC, eToro

For those with a memory that stretches back to the last part of the previous decade, a very long time in the start-up world, Rachely Esman will be a familiar name.

Ms Esman started Jivy Group, which owned the Marketspulse brand of trading platform software, which, along with co-founder Shai Hamama, she developed in order to approach the Japanese market.

A gentleman, a scholar and a pilot – Shay Hamama

Marketspulse is based in Herzliya, and Ms Esman and Mr Hamama’s technological and academic credentials are right up there with the best.

His education ranges from several science and mathematics degrees from Bar Ilan University, from which he graduated at a remarkable 19 years of age, before joining the Israel Defence Force and rising to Head of Development, a position in which he led the design and implementation of some of the most technologically advanced systems on earth.

Where are Ms Esman and Mr Hamama now? San Francisco and Sydney respectively.

Ms Esman went on to found Silicon Valley startup Wescover, taking a whole range of Israeli talent with her to the Bay area.

Yoni Avital, founder of Tradesmarter, a company which gained minimal market share simply because it was a properly designed platform for proper options brokerages, as opposed to the chop-shops run by criminals that are now dominating the headlines, has left the country for Singapore, where he has gone on to found Backpack.io, an all in one back office SAAS platform for financial services companies.

On a plane journey recently, I met with Mr Avital, whose elevated status today is a result of his tenacity in R&D and not having been swayed toward the grab-a-quick-buck-with-no-thought route. Good for him.

In 2017, Roy Saadon launched a new company – Access Fintech – which echoes the current need for Fintech, regtech and phrases such as the ‘reconceptualisation of financial services’ which have become commonplace in today’s financial markets, with every self-respecting bank boasting a distributed ledger technology (DLT) research department.

Mr Saadon was instrumental in the foundation and success of Traiana, alongside Gil Mandelzis. Where does Mr Saadon now live? London. Meeting recently with Mr Saadon, his future remains in the Square Mile, and his new venture, Access Fintech, part of London’s highly recognized fintech development landscape.

Silicon Valley’s Israeli influx – Rachely Esman

These are just a few cases in point. It would be quite easy to wax lyrical about all of the “Yordim” (that being a perjorative Hebrew phrase for someone who leaves Israel permanently) who have been instrumental in building up this industry on its technological backbone and are continuing to do so, but from the diaspora, in the top quality centers of London, New York, Sydney and San Francisco.

Who is left?

The shameful part in all of this is that the absolute dross that is left behind is the core reason why so much damage has been done globally to the genuine retail electronic trading industry.

Pseudo-gangsters who are semi-literate and bear no resemblance to any member of the fintech or financial services industry now run amok with their affiliate lead touting and binary options brands which have been proven to be the work of massive mafia-style crime gangs who threaten anyone who crosses them with physical violence, and have ripped off thousands of unsuspecting people globally, seeing this as a badge of honor.

A trip to the “Bursa” area of Ramat Gan, Israel’s center for this sector today will provide an insight into the low-class stature of most of these entities and their owners.

Just as it looked as though the Israeli government was about to do the right thing and extinguish this giant racket, it backed down, proving the exact reason why so many good quality entities and their shareholders and owners move abroad.

Israel has proven itself to be a hotbed of corruption and menacing business behavior, as the binary options fraudsters sit tight, quietly confident that they will be able to carry on their sordid businesses under a different name but with the same components.

A report this week by Israel’s police has confirmed what FinanceFeeds has been saying for a very long time, that being the operation of these brands and market makers by massive crime bosses from the underworld.

Technology first! – Yoni Avital

A senior Israel Police officer told a Knesset panel on Wednesday that Israeli crime kingpins are behind the binary options industry and that organized crime in the country has been massively enriched and strengthened as a result of law enforcement’s failure for many years to grasp the vastness of the problem.

In his speech, the senior Israel Police officer told a Knesset panel on Wednesday that Israeli crime kingpins are behind the binary options industry and that organized crime in the country has been massively enriched and strengthened as a result of law enforcement’s failure for many years to grasp the vastness of the problem.

“Our eyes have been opened,” said Superintendent Gabi Biton, who investigates financial fraud and money laundering. “What we’re seeing here is a massive organized criminal enterprise. We are talking about criminals at various levels of crime organizations, up to the very top.”

When bearing in mind that the entire country is run and operated by cartels, ranging from supermarkets to national port authorities, as outlined in my synopsis earlier this week in which I cited the entire Knesset Committee dialog on banning binary options to be complete hogwash and the absolute pinnacle of an intrinsically corrupt nation whose government is unable to rein in a brutal and primitive business environment which alienates the entire world and the sensible element of Israel’s population to the extent that they leave the country.

FinanceFeeds is aware of several physical attacks on dissenters, and has been on the receiving end of such also. In 26 years in this industry, I have never seen such behavior anywhere globally, nor have I seen such a rampant surge in a false financial environment operated by the underworld that, it appears, actually controls the government.

Forbes’ innovative favorite: Pini Yakuel

Sgt Biton said this week “Because binary options is such a lucrative scam, established organized crime groups gravitated toward it. They saw the huge economic potential in binary options,” he added, explaining that these organized crime bosses then hired professionals, foreign language speakers and payments experts to help them carry out their fraud.

“It has grown to monstrous proportions,” he added. “I can say that we are discovering new paths of money laundering through this crime that we were not aware of.”

In a nation in which families own the banks, there is absolutely no accountability for any actions whatsoever, and even worse, where people who push their way through everyone, destroying everything along the way, are regarded as ‘kings’ and behave in a loud and proud manner, boasting about how they prospered, yet none of them have ever finished school or are able to read a business proposal of any kind past the title before shouting their way through their opportunist lives.

I write this from London, and it pains me greatly that this is what has become of what was not so long ago a great power in the technological and R&D sectors of the global financial world, its young and urbane population being a ‘light unto the nations’ as prescribed 2000 years ago.

The sooner the smaller retail firms move away from the lead acquisition and CPA advertising model, and begin to consider themselves to be genuine financial services companies with a real value proposition, the more the likelihood of companies with genuinely value-adding products surviving, and in turn elevating the effectiveness and image of the retail sector as a whole, and balancing out the ghastly shadow cast upon the industry by those who have supplanted it.

If more effort was made making use of the better ancillary services run by experts, there would be less need to onboard clients via the back door and avoid proper regulation, this being an absolute admission of inability to compete in a civilized marketplace, despite carrying a recognized regulatory banner.

 

 

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