How to get it right in Cyprus – Guest Editorial
A lack of alignment with the proper components of our industry by island-based retail brokers has led to a fragmented marketplace, says California-based expert Nathaniel Hansen
Nathaniel Hansen is the founder and current Director of Research at The Socializers. He uses insights from social data to activate brand experiences for consumers and is focused on relationship as core source of driving brand growth and awareness. He is an early developer in the social data space and has been introducing brands to social media monitoring since 2009.
The forex industry has the best technology in the entire financial services industry – some of its best innovators are here today in Cyprus.
You can, for example, as a Cyprus based brokerage, now integrate a full multi asset solution to Chicago listed derivatives providers via CQG which is a respected derivatives and futures integrator by simply partnering with oneZero’s Cyprus office.
You can get a prime of prime relationship with British Tier 1 banks all the way to Japanese firms such as Nomura bank via international prime of primes to establish DMA access for global order flow on LD4, or Japanese order flow hosted on TY3 – all via relationships in Cyprus.
You can get analytical tools that monitor the quality of trade execution, check for stale pricing and show liquidity providers what their order execution quality is. All from Cyprus representatives of American technology developers.
However, the brokers do not understand how to modernize away from their low level lead / CPA business and dodgy offshore bank accounts. In addition, there is a lack of understanding on how to connect to proper multi asset venues.
We know of Prime brokers which gave up entirely on Cyprus because the brokers for the most part just wanted a price feed and then did lead buying/b book P&L model meaning that no order flow was processed to any live market. Hasn’t anyone moved on from gaming/lead churning? This is not the time or place in this industry for that sort of model.
There are some very innovative and well organized stakeholders which have invested serious resources into fixing what’s been wrong from a technological side in the FX industry, examples of which are oneZero, a company that truly understands the technological topography of the electronic trading business and is constantly moving to elevate the quality of broker infrastructure, and INVAST Global, which has this week become the first prime of prime broker to offer over a multi asset product range for MT5.
Now we need to fix the corporate culture in the FX industry, particularly how we approach clientele and how we think about clientele. We have to approach the right clientele and we have to make the trader more important than the trade, and in this age of data and information, this is absolutely critical and all of the top algo developers and HFT firms are already ahead on it.
A huge amount has been invested in cutting edge tech in the FX industry but most of the brokers do not understand how best to use this tech. As a result, clients are being underserved.
Clients from offshore firms which do not have any trading experience and are picked up as $200 deposits from CPA campaigns, which shouldn’t be part of a fintech environment anyway – how many CPA campaigns do you see major venues such as LiveVol or CME doing?
There is no way that anyone who just does affliate marketing and sees clients as a deposit/profit business will ever gain any business traction as the information age is well and truly here.
Traders are now very advanced adn they should be the target audience so brokers need to have the right support, service, analytics and structure otherwise they will end up with the $200 novices which lose their money and see it as gambling, and we will all lose our reputation, the tech and innovation will be in vain and the regulators will stamp on the entire business.
If brokers are high quality and offer good service and proper banking and proper understanding of how to structure a business and integrate with the best tech providers and prime of prime liquidity providers and are aligned with them, they can go and easily onboard institutional hedge funds and prop shops, which is what all the main PBs and tech integration companies for this industry are committing toward making solutions for. Many brokers in Cyprus are far from able to do that.
This is why it is vital to work with proper firms who are serving the right clientele with leading edge technologies.
I think of a recent conversation I had with Arif Ahmad, who is the founder and CEO of Swedish brokerage Scandinavian Capital Markets, who said “There’s no reason for traders to move their actions offshore to far-off countries with no infrastructure when they can operate out of a closer locale that also happens to be more reliable and honest. Located in the geographical center of Northern Europe, Sweden is not just the gateway to the Nordic nations, it’s a hub of operations from all parts of the EU and UK.”
“Swedish companies export their goods and services across the globe, giving them an understanding of different cultures. In addition, the Stockholm business world is fluent in English – making it simple for companies from all over the world to thrive within its borders, is well known for a very high technological contribution to the world, and a good, solid banking ecosystem with zero corruption.”
“These are ideal attributes and a good basis for working properly with the components of the industry that can help move brokerages forward and increase the quality of their client bases” he said.
The above measures will improve the revenues of institutional providers and imbue a better reputation into the institutional tech sector, as well as show how to bring up the quality of the retail sector, which is now vital.
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