iFX EXPO Dubai: Natallia Hunik, Chief Revenue Officer at Advanced Markets discusses DMA and STP benefits
FinanceFeeds went to the United Arab Emirates last week to meet the trading industry leaders for the first time since the pandemic at the iFX EXPO Dubai. Being face-to-face again was a memorable experience that attendees will carry with them for years
Among the leading event-goers were the Advanced Markets team, representing the true Direct Market Access (DMA) liquidity, credit and technology solutions provider.
FinanceFeeds’ Nikolai Isayev spoke to Natallia Hunik, Chief Revenue Officer at Advanced Markets, to learn more about what the leading prime of prime broker is up to now that it has raised funds from Corbel and Forexify to fuel its next growth phase.
First, a moment to appreciate being back on the frontlines and being able to shake clients and prospective clients’ hands – something that used to be a given, just like the air we breathe.
“I don’t think that I’ve ever seen FX people smile this much”, Ms. Hunik said, adding that the event was very productive and with a great atmosphere. “I see a general trend of a lot of companies moving to Dubai, so I would expect more shows to be held here in the future.”
In regard to the investments from Forexify and Corbel, Ms. Hunik praised the “new milestone for Advanced Markets, one of the oldest and most respected companies in the business, founded in 2006”.
“We will be expanding our global footprint and bringing new asset classes into the equation”, Ms. Hunik continued, pointing to the already established position of the company across the globe, including licenses in Australia and the UK, as well as offices in Europe and Asia, besides the company’s headquarters in the United States.
Advanced Markets has recently established an entity in Bermuda, appointing ex-Accuindex Samer Mourched as CEO, as the firm adds Emerging Markets to its strategy toward becoming the preeminent broker in the foreign exchange and CFD trading industry.
Advanced Markets remains a fully DMA, 100% STP, Prime of Prime broker. The extreme volatility and disruption brought on by the Covid-19 pandemic, particularly in 2020, resulted in the phenomenon of many brokers failing and led to the industry becoming more concerned than ever with transparency and conflicts of interest. This is where Advanced Markets steps in.
“If you’re a fund manager, you will probably want to look to transact with a company that offers a 100% STP business model. This model provides total transparency and reports every liquidity provider behind each trade. “This eliminates the conflict of interest, a conflict which also exists in equities as we’ve all witnessed recently with Robinhood. Conflict is always there”, she said, further explaining that “the 100% DMA model may not be suitable for everyone as there are certain benefits to using market makers.”
So, it all comes down to the objectives: if you want guaranteed transparency you will most likely want to deal with a 100% DMA firm.
Are authorities doing enough to regulate conflict of interest? The Advanced Markets executive said that best execution policies, such as RTS, are a double-edged sword. They do somewhat protect users from dishonest brokers, but the adverse effect is that a lot of people are moving offshore to avoid the leverage and product restrictions that come along with increased regulation.
“My personal opinion is that we lack a self-regulatory organization that encompasses all brokers”, she said, reminding me that an FX Global Code of Conduct is already out there, but “to my knowledge, only Advanced Markets and one other broker have signed so far.”
But how can a broker be sure it is partnering with a 100% STP (full DMA) liquidity provider? Well, it can’t be, unless the broker is licensed in the European Union, which means the client can see the RTS report. “If it’s outside the EU, you kind of have to believe what they tell you”, she said.
Moving to the topic of democratization of trading, volatility, and Advanced Markets’ role in it, Natallia Hunik believes the power of the crowd is here to stay thanks to the new technology. An anecdotal example is a popular signal provider who joined a broker one time. More than 10,000 accounts were opened the same week. Not only is it an opportunity for brokers, but it also presents the challenge of how to handle 10,000 new accounts doing the same trades at the same time.
“We have access to original sources of liquidity in FX due to our Tier 1 Prime Broker relationships with UBS AG and Standard Chartered Bank. Most brokers are sourcing through multiple hops. We can solve that issue. We provide the deepest pool of customizable liquidity, aggregating the top banks and non-banks, ECNs and multi-asset providers.
“So, should any market crunch or other aberrations occur, which may lead to some liquidity providers to turn their feeds off, Advanced Markets still has plenty of backup/failover providers due to its unique pricing infrastructure and relationships”, she said, further explaining that “with black swans happening more and more frequently, market participants need a reliable source of liquidity in order to trade confidently.”
A lot of regulators are now requiring Negative Balance Protection (NBP), with Australia’s ASIC having recently imposed that rule. That issue is quite an interesting topic as, while the industry sees where the regulators are coming from – to protect the end-users – brokers are left exposed. They have to “zero it out. Take the hit”.
“I see the merits of the policy but it wasn’t analyzed enough from the perspective of the long-term effect. The rule has encouraged many brokers to do more market-making instead of auto-hedging or doing STP”.
The trading industry never sleeps. It is constantly evolving with changes in technology prompting regulators to make new efforts to control the markets and protect investors, which then creates a new chain of reactions in a never-ending cycle.
No matter the changes, transparency will never lose value in an industry that is built on trust.