FF Podcast: PipFarm brings a new approach to “prop trading”

Rick Steves

James Glyde spoke with FinanceFeeds Editor-in-Chief Nikolai Isayev about PipFarm’s sustainable approach to risk management, reasons for choosing cTrader, gamified trading, and why it is not “prop trading”.

James Glyde podcasts 1000x750

FinanceFeeds has released a new episode of its podcast hosted by Editor-in-Chief Nikolai Isayev. This time, the guest is James Glyde, Founder and CEO of PipFarm, the newly launched funded trader firm at a pivotal time for this industry segment.

James Glyde is a seasoned professional in the financial technology industry with a strong background in leadership roles, widely known within the brokerage industry as the former Chief Commercial Officer of Spotware Systems, the developer of cTrader.

Listen on your favorite streaming audio portal or our YouTube channel.

After leaving Spotware, James took on various roles in the FinTech industry, leading incubator projects in blockchain and payments at Purple Next and Walletory. He also served as the Chief Operations Officer at Scandinavian Capital Markets (SCM), where he oversaw the company’s bespoke liquidity solutions for institutional and professional traders.

During that time, he was the Chief Marketing Officer at SCM-affiliate Nordic Funder, a proprietary trading firm based in Stockholm, Sweden, that evaluates and funds traders on its trading platforms. This latest experience drove him to launch PipFarm.

The interview covered various topics, shedding light on the unique aspects of PipFarm and the overall funded trader industry.

Risk management and gamification at PipFarm

James Glyde highlighted the risk management challenges faced in the funded trader model and discussed the innovative approach taken by PipFarm to address these challenges while providing a competitive product and user experience.

“I saw a pretty unique operating model in terms of risk management, how we can work in this very risky product offering. Because if you think about how a brokerage works, you have the margin from the trader. But in this model, you don’t have that. So you’re taking maybe 10 times more risk than traditional CFD brokers because the kind of capital or the assessment fee that you have from the user is very disproportionate to the amount that you’re potentially risking. So the risk dynamics are heavily skewed, which makes it very complicated to manage.

“But having experienced how to handle this within other projects, I think there is a very good way to manage this. I only know a few other firms that are doing it this way. And they seem to be doing very well. And it doesn’t have to be at a disadvantage to the trader by offering a less compelling, less competitive, less useful product. Being able to give a good product a good experience, and also operate a business that will be sustainable, I think is already a huge competitive advantage, because we’re seeing quite a few operational issues occurring in the industry.”

Listen on your favorite streaming audio portal or our YouTube channel.

Glyde acknowledged the issues with such an unregulated environment for this industry segment, which allows firms to operate outside best execution practices and be extremely aggressive when it comes to marketing. Instead of going the “bonus incentive” route, PipFarm gamifies the trading experience to the benefit of both traders and the company.

“What I’m really keen on developing is rewarding users based on experience. What we’re exploring is more experienced-based perks, which we call Power-ups, kind of going into the gamification. So the big advantage that I see in this unregulated environment is we can gamify the product quite a lot. And that’s the angle that I really want to pursue.”

One interesting discussion point was the distinction between funded trader firms and proprietary trading firms. James emphasized that the two terms are not interchangeable and explained why, namely the need for a fund management license if traders are actually managing third-party funds. Confusion is another symptom of the unregulated activity.

What kind of traders join PipFarm?

Regarding the profile of traders joining PipFarm, James revealed that the platform attracts traders from various income brackets, with a focus on accessibility for those with limited capital to invest. He also mentioned the use of trade copiers by some traders to optimize their trading across different firms.

“We recently did a survey of our still-growing community and what was interesting about the demographics is half of our users came from what would be considered a low-income bracket, and the other half came from a high-income bracket. And there was one or two respondents in between.

Listen on your favorite streaming audio portal or our YouTube channel.

“So this product seems to be attractive to people who don’t have a lot of capital to trade, or invest, which is one of the main selling points that appeals to this product. And the other one, the other category of people who are experienced and kind of understand the mechanics of this product and use it to optimise capital.

“We’ve also seen a lot of traders using trade copiers. They buy the biggest account that we offer, and they’re also using the biggest account that other firms offer. So they are pooling collectively, max allocation with all these firms.”

In terms of packages, Glyde explained the only difference is the amount of experience points users would earn for the purchase. “So with a 5k and 10k account, you get one point; with a 100k account, you will get three points. After that, it’s the same. We reward points when you pass the evaluation when you do KYC for the first time. The user can scale every 30 days to get 50% more funding. So that would actually be another difference.”

As to algo trading, James Glyde warned that PipFarm wants each user to make unique trades, which means that users should not acquire an EA on the market. “We do have a rule that users cannot go to the MQL5 marketplace and just buy an EA […] Obviously, there are people who don’t look at things like that. We try to observe the trading environment continuously. So we can isolate people who we think are not doing what we recommend. And we can politely ask them to change what they’re doing or say goodbye […] We’re looking for unique trading strategies and don’t want 50 guys all doing the same thing, because that’s going to be a huge concentration risk for us.”

Why cTrader and CFDs

A significant decision taken by PipFarm was the choice of cTrader as its trading platform over the popular MetaTrader 5. James explained that the familiarity and stability of cTrader, as well as the flexibility offered, were key factors in this decision.

“I know this platform inside out, it’s the only platform I use for trading. it’s about being able to sell the product. If you can’t relate to your users if you don’t love the product that you’re selling. So for me, it was a very easy decision to use cTrader: not only do I understand it and know it very well, but I know that it’s been battle-tested, right? It finished its phase of being a new platform a decade ago. There are no issues with Mac or server issues or downtime, it’s an incredibly stable platform.”

Listen on your favorite streaming audio portal or our YouTube channel.

The podcast also delved into the future of funded trader programs and the potential expansion into other financial markets like options and futures. While acknowledging the popularity of these markets, James emphasized the significance of CFDs in regions where they are prevalent, noting the speculative nature of traders and their preference for accessible trading products.

“I think CFDs are one of the easiest contracts to understand from the trader’s perspective because they just roll every day, there’s no expiry. They trade even when the futures market is closed. So they’re just continuously trading and open. It doesn’t even matter about your position, really. So I think if CFDs exist in a region then I think they will always be the prominent instrument that people are using.

And in the absence of CFDs – as you said, people are speculative by nature – so, they’re just going to find the next best thing, which is futures, I think futures are great. It’s very interesting that some firms are starting to look into futures and offer futures because they are exchange-traded, which makes them incredibly transparent, and see everything that is happening with the contract, right? The price, and price origination are clear and transparent. The execution is transparent. So I do think that’s very interesting from the perspective of having to maintain trust with the user because that was always the problem with OTC products like CFDs – a huge lack of transparency. And that’s why all of the reporting regulations came in.

The interview provided valuable insights into the innovative approach of PipFarm in the funded trader space and shed light on the evolving landscape of prop trading firms. As this emerging segment continues to grow and adapt, firms like PipFarm are paving the way with their unique offerings and risk management strategies.

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