FinanceFeeds Podcast Ep. #16: Steven Hatzakis on ForexBrokers.com and Crypto

Rick Steves

The 16th episode of the FinanceFeeds Podcast is out, featuring Steven Hatzakis, Global Director of Online Broker Research at ForexBrokers.com and StockBrokers.com.

The two highly reputed websites belong to Reink Media Group (RMG) along with StockTrader.com, Investor.com, and BrokerNotes.co.

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“I’m very proud to be a part of RMG and the world-class domains it operates”, Steven Hatzakis told Nikolai Isayev, host of the podcast and Editor-in-chief of FinanceFeeds. The FX industry expert was hired in 2016 to grow the ForexBrokers.com website.

Steven Hatzakis leads research for Forexbrokers.com since its inception

Stockbrokers.com, he explained, was already a big deal back then and is still one of the most trusted sources for stock broker reviews, primarily in the US, UK, and Canada, for self-directed investors of stocks, ETFs, mutual funds, futures, and even forex and cryptocurrency.

ForexBrokers.com, on the other hand, started in 2016 and yet has steadily become one of the most trusted sources for FX and CFD broker reviews thanks to its research process, “I don’t think there’s anyone else that dives as deep as we do ”, he said, pointing to the team’s scientific approach of how the team ranks and rates brokers: an analysis based on nearly 3,000 data points. Over 6 million people have read ForexBrokers.com reviews and guides since inception with 1.5 million visitors in 2022 alone.

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RMG also operates BrokerNotes.co, which takes into account country-specific trading restrictions and regulatory environments when testing and rating over 65 individual brokers in 50-plus jurisdictions.

It all began with StockTrader.com, launched in 2007, which provides online stock trading education, tips, guides, and reviews, covering charting and tools for traders. Last but not least is Investor.com, a top- tier domain purchased in 2018 and focused on personal finance: financial advisory, IRA, credit cards, high yield savings accounts.

“Amazing culture”, Hatzakis said about Reink Media Group, a company that has recently been B Corp certified, which means that the business meets high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.

“ESG is a theme that’s grown. Definitely, something that’s good to strive for”, he said, adding that there are many cases of virtue signaling, but B Corp brings more standards and accountability to ESG themes through ranking and vetting and a review process for companies.

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“We had to go through a rigorous process to get that approval. We’re proud of that”, he continued, noting that B Corp is aligned with many of the UN’s sustainable development goals and how shareholder capitalism is evolving beyond just maximizing profits . Firms must be balanced toward well-being. “People before profits” is RMG’s motto.

How ForexBrokers.com rates and ranks FX and CFD brokers

Nikolai further enquired about ForexBrokers.com and the evolving method they use to rate brokers. Steven Hatzakis explained the Trust Score is based on a proprietary algorithm that takes into consideration things like the number of licenses, from which jurisdictions if the broker is a public company or not, if it has a banking license, how many years in the business, etc.

ForexBrokers.com recognizes that certain jurisdictions are evolving, with some taking more enforcement actions than before, and the team updates its view on them accordingly. “Big difference between Cyprus and Saint Vincent and the Grenadines or the Marshall Islands.”

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“We list all regulatory licenses across different tiers”, he said as he named the tier 1 jurisdictions: United States, United Kingdom, Switzerland, New Zealand, Japan, Hong Kong, Australia, Ireland, and the European Union, while noting the existence of regulatory arbitrage in the latter due to the EU passport.

Cyprus was originally a tier 2 jurisdiction “because of what was going on there 15 years ago”, but ForexBrokers.com moved it to tier 1 as CySEC has stepped up, especially since Brexit, he explained.

Tier 2 jurisdictions include India, Russia, Israel, South Africa, Thailand, and the UAE. Tier 3 jurisdictions include the Bahamas, Belize, British Virgin Islands, Vanuatu, Bermudas, Cayman Islands. Mauritius is a recent addition to the list for stepping up with minimum capital requirements and enforcement.

Other criteria for ranking FX and CFD brokers include commissions and fees, platforms and tools, mobile apps, market research, education materials, and trust score. “We rank over 100 variables across major categories”, he continued, pointing to the “ton of work to find out average spreads” as looking at minimum spreads is not enough. Per trade commission and round-turn commission are other variables used in measuring trading costs with brokers. “We go far into detail across every category.”

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ForexBrokers.com also provides rankings for Best Brokers for Social Copy Trading, MetaTrader, Crypto Trading, Algo Trading, etc. The website used to publish yearly reviews but has recently shifted to a more dynamic approach that would benefit both traders and brokers, pushing the industry forward. “I don’t think there’s anyone that dives as deep as we do”.

“Historically, financial markets have done well during periods of high inflation”

The talk between Nikolai and Steven covered the key trends for 2023. Inflation and the rising interest rates environment will remain a major theme for markets, including FX and equities, as well as commodities, and exacerbated by supply shortages.

“Historically, financial markets have done well during periods of high inflation. Equities look like they’re at the edge of a cliff, but maybe the drop in the market that everyone’s anticipating will not be as deep”, he stated as he pointed to the rise of carry trades as another key trend. “Makes traders think like long term investors”.

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While they can hedge with cross- currency pairs, carry trade positions can be both a driver of potential returns but also of potential losses because markets can move very quickly and make traders lose all their gains.

Crypto needs draconian regulatory measures

Crypto is an inevitable topic, especially now with the ‘crypto winter’ further pressuring the digital asset industry. Steven Hatzakis started out by stating that Bitcoin itself at a network level (miners, hash rate, cryptography, security mechanisms) has not been affected by the crisis.

The ecosystem built around the network (exchanges, payment providers, prime brokers, etc), however, are the ones in a hot spot. “That’s the area regulation is surely needed.”

The collapse of Mt. Gox, the biggest exchange at the time, didn’t have the same repercussions of FTX because of the contagion factor. This only further proves that regulation is badly needed.

Being FINCEN registered as a money services business is not enough. Crypto needs extra mechanisms, he argued, suggesting a combination of banking mechanisms with money transmitter regulations and moving that into a framework that would hold crypto exchanges to the same standard as FX and stockbrokers, namely capital and trade reporting requirements.

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Steven Hatzakis reminded us that the FX industry in the United States was once prone to frequent scams, nearly 20 years ago, but regulators came in, raised capital requirements to 20 million, forcing the industry into a massive consolidation. The same draconian measures may be needed in crypto, he argued.

He defended US regulators’ enforcement approach to crypto in recent years, going after token sales, and applying the how ey test, while offering crypto exchanges a sort of leeway, without much scrutiny. “But now time has come where they need to be held to a much higher standard: more transparency, how are they executing orders, who are their LPs, exposure, and what is the required amount of capital in reserves”, he said, admitting such moves would not end frauds or bankruptcies, but would certainly drastically reduce them and raise trust within the industry.

To custody or not to custody?

While talking of crypto exchanges managing hot and cold wallets, Nikolai suggested the non-custodial model, which was welcomed by Steven as a fascinating idea, but he believes the traditional brokerage industry is not there yet.

Slippage, lack of liquidity, and front running are a few of the issues brokers could run into when going non-custodial, he said, while adding that custody is a necessity for brokers offering mass- scale products or else they’d be losing time and efficiency.

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“Personally, I think when we look at traditional brokerage model, brokers have always held clients funds because they need to be able to go out to the venues they’re connected to and send those orders from clients straight from within the trading platform”, he continued, adding that the brokerage model may evolve in the future but won’t go away “because you’ll always need intermediary value- added services”.

Steven Hatzakis has been in crypto since 2013

According to Steven Hatzakis, he has invested in over 60 blockchain projects and tokens over the years, after mining bitcoin in 2013 from a labtop. He’s participated in ICOs across the world including in the United States. He elaborated how extensive due diligence is hard in crypto because there are no standards and “so many bad practices going on in the industry”, namely the loophole of officially aiming for decentralization without any feasible or viable strategy in order to prevent a token from being classified as a security.

On the other hand, there are many well-intentioned projects that are working toward decentralization but they’re just not mature enough. Hatzakis explained it is very difficult to decentralize projects because they need to be large enough to sustain multiple attack vectors and not be compromised. Ethereum is an example of a project that could be seen as a security, but it has now achieved decentralization.

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The FX industry expert has become well-versed in token economics, cryptography, vector attacks, and crypto software. Bullish on the technology overall, he has taken an advisory role at the Cybersecurity for Executives at Ithaca College. He is also Ambassador at Gitcoin and ixo Foundation, and advisor at Etheralabs, among other advisory and consultancy roles.

The podcast also covered Steven Hatzakis’ personal life. Born and raised in New York, Steven Hatzakis moved to Florida, where he enjoys surfing, while also spending time in Greece, where he does spearfishing, diving, and boating in the summer.

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All previous episodes of the FinanceFeeds Podcast are available on all popular streaming audio platforms.

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