The kick growth in on line trading: How can you benefit? – Guest Editorial
It is far more cost effective to get a ready made introduction on board, at around $136 per client than paying on average $1700 for a digital generate lead that may not cover the business set up costs, says senior FX industry executive Meir Velenski
Meir Velenski, CEO of Velenski Financial Group is a market expert on FX and CFD trading and a consultant to firms in this market. Here, he looks at how he sees the retail FX market as the new year begins
2020, a year known for the outbreak and a dramatic change in behavior globally. We all know this and thousands of articles, news briefings and documentaries have been produced showing the changes needed in global behavior.
Those changes have been made on a macro scale whether government instigated, state instigated or city instigated. There have also been significant changes at the Micro level, those largely consisting of interpersonal changes and differences in human conduct in public compared with years gone by.
Who would have thought that public distancing was introduced to stop the spread of what is being portrayed as a ‘plague’ and not for the obvious bad personal smells that used to be the reason of social distancing.
Lets look at the Micro changes in a bit more detail
The big and most obvious one has been the need for relocation into private homes. In other words, the need to leave the open plan office or workspace and isolate at home or work from home. This relocation has in fact suited many workers if not the majority and we may see a difficulty in returning to the office regime in the next few years. One likely reason is perhaps because of comforts which those working at home have now got used to on a permanent basis, and the second because of costs savings for businesses who may not need to rent large commercial space.
How has all this impacted on our main topic of on line trading?
On line trading in Corona times.
The spread betting market place in the UK and the CFD marketplace outside the UK would never have imagined a savior for 2020 in the form of COVID-19 .
Am I out of my mind, you are asking!! Not at all. This is what has pushed the UK and European CFD firms and FX firms to lock in huge profits from client B Book losses.
The industry was recovering from the new limits and regulations on personal non professional accounts, and there was a view or fear that the new leverage margin limitations would knock the FX and CFD business back years, even to the degree that publicly listed FX and CFD firms stock was downgraded and became a target for short sellers.
Once Markets began to collapse in March 2020 the FX and CFD business share price also slid UNTIL they began to report bumper profits.
Why? The reason is simple. The whole population is at home and bored. There are no pubs, holidays, flights, events, football or other items to feed every day com. Everything has stopped. So the experienced and the novice trader begin to up their volumes giving more profits to the FX/CFD firms. In fact the volumes were very significant well above anything seen for years, and this is likely to stay for at least 24 months.
On line trading is one of those on line activities that the public get involved in as it is interactive to a degree and live pricing gets the trader excited and stimulated. The on line FX/CFD firms capitalized on this and banked huge profits from their existing client bases.
The public locked at home were constantly fed images of world closedown and market chaos with the Dow and major Indices losing or making 5/6% some days. The VIX volatility index was at all time highs and this price movements attracted the trader to increase their activity.
So where can you make money in addition? As an introducer broker, commonly known by its acronym IB.
As a private trader most likely you talk to your friends and family about trading at some stage. It is likely that these individuals have or considered opening an account to trade. Especially in the UK where spread betting accounts have zero tax charge for capital gains or income tax.
Under these present circumstances, the likelihood of growth in more people trading now surely would be a good time to become an IB to a FX or CFD business. Taking into account that some or most UK firms require the IB to be a FCA registered person there are companies that are IBs and would take you on under their umbrella.
As a IB then the introducer can make commissions from all the trading that the client transacts under his IB agreement. Think about it.
A furloughed worker, retired or an active employee has a lot more time at home due to working from home and therefore he could utilize this time in building a IB practice.
The FX /CFD firm should also be looking at expanding their homegrown potential lead generators and introducers by marketing the local population and selling then the benefits of becoming a IB. It is far more cost effective (cheaper) to get a ready made introduction on board (cost about $136) than paying on average $1700 for a digital generate lead that may not cover the business set up costs.
The FX and CFD firms are very keen to widen their client base and are spending significant amounts to get a new client on board.
In addition these firms can recruit IBs in various jurisdictions set them up with a small budget and grab the overseas local business also. The problem is that the firms are not thinking out of the box and any good idea is quickly shelved as the broad thinking needed is missing.
Maybe the current situation and the increase in on line trading will be the push to get more IB business on board.