Prime of prime and liquidity provision, automation, regtech, digital assets, and the evolving direction of all-important Cyprus as a multi-faceted FX industry linchpin. Here is a full recap of Day 1 of the iFX EXPO here in Limassol, Cyprus.
Cyprus has become a very mature center for retail FX over the past few years, having attracted over 160 retail FX brokerages to establish on the island since the national regulatory authority, CySec, began to provide a framework with low entry barriers, Europe-wide credibility and accountability under the MiFID infrastructural regulatory directive which is set out and enforced by the European Securities and Markets Authority, low taxation and, of course Cyprus’ enviable lifestyle.
CySec itself may well have trodden water since the inaugural days of the idea of Cyprus as a ‘hub’ for retail FX, but the actual electronic trading industry, locally and globally, has not.
Far from it, in fact.
This morning, the second day of the iFX EXPO International 2017 FX industry conference produced and hosted by ConversionPros is about to begin, adding to the topics and current affairs which were discussed in great detail yesterday.
Before taking a closer look at the actual substance and subjects, it is important to note that over 3,500 pre-registered delegates from the global FX industry’s brokerages, technology providers, prime of prime brokers, regulatory technology firms, management consultancies, platform and connectivity providers and liquidity management companies were the basis of attendeeship to what is one of the world’s most important annual fixtures.
In addition to 3,500 pre-registered industry professionals, a further 500, mostly from within Cyprus, registered on arrival, and the previous evening, 2,000 executives attended the welcome event, making this conference the most populous since its commencement in 2012.
Attendeeship viewed singularly is not the main point of interest, however.
The evolution of Cyprus as a mainstay of the electronic trading industry across all sectors is apparent, as there is far less representation by the firms which once sought to hold the island’s industry back. No mention of binary options, and no representation by their brands is apparent, and that entire sector is notable by its complete absence.
Apart from a very small handful of platform vendors/market makers that are associated with that particular business, the entire event, and discussions within the event have been free from the shadow of the binary options cloud that has hung low over Limassol since 2011.
Instead, the international attendees include British, Australian, North American and local prime brokerages, institutional liquidity partners and service providers.
The panel discussions that took place during the course of yesterday focused on very important matters, and were hosted by senior industry professionals who actually interacted with the leaders of industry that formed the discussions, interjecting and challenging their responses to all important industry issues.
In keeping with the avantgarde, FinTech direction that Cyprus aspires toward, 9.30am marked a workshop by Adam Leonard, CEO of Bitcoin technology provider BlockEx.
Long since has FinanceFeeds maintained that whilst Bitcoin itself is the preserve and brainchild of mavericks and anarchists, hence has a history peppered with demises, e-wallet hacks and nefarious exchange and dark web market operators and a future outside the mainstream, blockchain is the absolute darling of the astute financial institutions of London and New York, alongside the ‘big four’ management consultancies, all of whom are investing substantial amounts in its development in order to automate distributed ledger and back office activities within banks in the quest for efficiency and lower costs.
Mr. Leonard is a proponent of this direction and began the day buy providing a workshop which demonstrated the BlockEx platform and clarified the nature of digital assets.
During the thirty minute elaboration, Mr Leonard demonstrated how Blockchain has evolved from just being associated with being an integral part of Bitcoin, how it came out of “hype and proof-of-concepts” stage and went on to actually changing the way financial and capital markets operate.
Focusing on explaining what a Digital Asset is, covering bonds and equities, Mr Leonard demonstrated the capabilities and advantages of the BlockEx Platform and how it could allow brokers to sell digital assets to their investors and traders.
At 10,00am, PLUGIT took the FinTech baton from Mr Leonard, looking at how Microsoft Cloud technologies can empower companies in the FX industry.
The FX industry is a highly competitive market that relies heavily on using the best technologies available to deliver the fastest results to its customers. Lower latency is always the key and often comes at a high premium, hence PLUGIT’s management team elaborated on how Microsoft Azure can be leveraged to provide a unique and compelling solution for the Forex market, leveraging cutting edge technologies.
Panel discussions during the course of the day centered on artificial intelligence and its role in the FX industry, which was covered in detail by FinanceFeeds, a discussion that FinanceFeeds continued during the evening at a meeting with several senior FX industry figures, in which not only the client side aspect of artificial intelligence – that being acquisition, retention, marketing and intuition toward client trading behavior – was discussed, but FinanceFeeds raised the important point that machine learning in the institutional sector, as in relationships between broker and liquidity provider, where to execute trades and how to conduct risk management is a different matter.
The unanimous consensus was an agreement with FinanceFeeds in that machine learning, whilst not advanced enough yet to take a major role, is relevant in taking on some of the back office and administration tasks, as well as certain marketing and sales channels within brokerages, but will never be able to automatically negotiate with a prime brokerage division of a bank where to place an order, or to channel a client’s trade toward the dealing desk or pass it to the liquidity provider, or take the place of senior staff whose responsibilities are to maintain B2B relationships between broker and provider.
This may well be an electronic business, but it is also a relationship business, something that is reinforced by the dialog at iFX EXPO International 2017.
As MetaTrader 5 finally heads out of its 7 year wilderness into mainstream popularity, its virtues are being appreciated and recognized by the entire industry.
FinanceFeeds had many discussions yesterday with institutional vendors and liquidity providers on the subject of MetaTrader 5’s scalabilty, its cost-saving advantages for brokers with offices in different global regions due to only one server being required to serve multiple locations, and the ability to connect genuine multi-asset solutions to the platform.
Whereas MetaTrader 4 had been subject to adaptation by various third party software vendors over the years its origins lie firmly in the camp of the b-book market maker with a spot FX product range, MetaTrader 5 is absolutely given toward connectivity to exchanges – DGCX has various MetaTrader 5 brokers connected to it to trade listed commodities and INR futures contracts – as well as multiple connectivity via specialist interfaces such as that developed in partnership with CQG by DirectFX which allows retail customers to trade spot commodities, FX and precious metals via one connection to OTC liquidity providers, as well as listed derivatives on CME via direct connection to the exchange, all on one platform via one brokerage.
At 10.45am yesterday, MetaQuotes held court, explaining to the delegates at iFX EXPO what can be expected from MetaTrader 5 in future.
In terms of client side user experience, optimization and continual improvement of value proposition was a continual discussion during the course of the day among retail participants, and of course, as expected, a dialog with regard to prime brokerage and liquidity provision took place.
This year, due to unavailability of credit from Tier 1 banks, the non-bank prime of prime sector has expanded exponentially, with new prime of primes entering the fold, as well as retail firms offering institutional B2B feeds from their own liquidity provision.
This debate concurred that liquidity remains a major concern for brokers. After market events have reshaped the prime brokerage space in 2015, new regulatory requirements will require still more adjustments. Industry participants provided a concrete, focused account of how non-bank providers are doing, what MiFID 2 means for the retail side, and how banks and institutional players see the shake-up in Limassol and London.
In just twenty minutes, the second day of the iFX EXPO International 2017 conference opens its doors, during which FinanceFeeds will provide live coverage and viewpoints from industry leaders and exclusive interviews direct from the event.
Here is a montage from Day 1: