Industry predictions for 2017: Retail FX to remain highly competitive

FinanceFeeds continues to explore the FX industry outlook for this year, with the next Forex senior figure to discuss the major themes that brokers should consider in 2017 being Jonathan Baumgart, CEO, MoneyMatters.pl & Atomiq Consulting. Mr Baumgart kindly agreed to share his view on what’s coming in 2017 from a retail brokerage perspective.

He is well known in the US, having spent nearly five years at FXCM as a Sales Associate, as well as launching the firm’s Berlin office in 2010. Later in 2010, he joined Boston Technologies, where he was Director of Training and Development and, subsequently – Account Manager. He left to set up his own consulting business targeted at FX brokers, liquidity providers, white labels, and software firms.

Mr Baumgart struck an upbeat note regarding the dynamics of the retail Forex sector.

“Retail FX remains highly competitive. Despite regulatory changes that might slow down the industry, the extreme level of competition doesn’t seem to be going away anytime soon”, Mr Baumgart said.

He also highlighted a potential risk that looms for retail FX brokerages, as a result of the this highly competitive environment:

“To stay ahead of the game, it’s tempting for brokers to always look for “the next big thing” while losing sight of the basics: quality client support. An easy mistake is to focus solely on sales while neglecting the satisfaction of a broker’s existing client base. It’s not just my opinion but also known widely in sales that acquiring a new client is always more costly than upselling an existing relationship.”

A major consideration that Mr Baumgart noted is technology development.

“We focus heavily on technology and feel this year will be disruptive”, he said.

“MetaQuotes has signaled their intent to make a strong push for MT5 this year. All brokers should be prepared to hear more clients talk about MT5 and also research the platform themselves; a better understanding now is a great way to come ahead of these changes. I’m available to any broker who wishes to discuss MT5 in more detail, it’s a platform our firm is very familiar with”, he added.

The rapid advance that MT5 made last year were discussed and explained a number of times by FinanceFeeds. One the major reasons for the platform’s success is that it started supporting hedging capabilities.

Next up, Mr Baumgart highlighted changes in the regulatory context. The end of 2016 brought a key development for UK CFD firms servicing retail clients, as the Financial Conduct Authority (FCA) unveiled its proposals aimed to beef up standards across the sector and ensure enhanced consumer protection. In addition, early this year, France enacted new regulations that prohibit the advertising of risky financial instruments, such as binary options.

Mr Baumgart said:

“Regulatory changes are a constant in the FX industry. Major themes will be the status of Binary Options within the EU, the FCA’s proposed leverage & client onboarding changes, and how CySEC handles industry pressure for stricter regulation. The FCA decision will be especially interesting, I feel a too harsh stance will push more business offshore.”

In conclusion, Mr Baumgart noted the difficulties that many FX brokers face when trying to open a bank account. FinanceFeeds has provided some extensive research on the topic, showing how a number of major banks, like HSBC and Barclays shun working with FX firms, especially with newly established ones.

Mr Baumgart said:

“Finally, 2016 posed many challenges to newly formed brokerages seeking bank accounts. We expect this to continue. Despite these challenges, we are one of the firms who offer several suitable bank account options within Europe. Interested parties can contact us for more information.”