Live from Guangzhou: An exclusive audience with south China's IBs - FinanceFeeds

Live from Guangzhou: An exclusive audience with south China’s IBs

Andrew Saks

An exclusive audience of top level Chinese IBs were hosted by FinanceFeeds today in Guangzhou. Here is the full report

In all sectors of the OTC derivatives industry, China is at the center of the agenda, it being home to the most structured and largest B2B electronic trading environment in the world, by a very long way.

Vast networks of introducing brokers operate in China, and with FinanceFeeds being the only international FX news and research companyto have a comprehensive commercial presence in the People’s Republic, FinanceFeeds China, our extensive relationships among China’s industry leaders on a national basis is a unique value that we are committed to bringing to the FX industry’s higher level firms.

Today, FinanceFeeds hosted a bespoke IB Symposium in Guangzhou, China’s third largest city and an important FX industry center for the southern part of the country.

IBs in China are instrumental to the industry’s sustainability globally. They are large, well-staffed companies that offer portfolio management, automated trading and asset distribution services to high net worth investors across the second tier development towns and large financial centers of China, the most important region for the retail FX industry in the world.

FinanceFeeds has specialized in researching the FX industry’s continually evolving landscape and business ethos across mainland China for several years, and has built substantial relationships with large introducing brokers that in many cases have in excess of $300 million in assets under management, and whose requirements for execution are to place business with reputable brokerages in well-regulated jurisdictions in Western countries.

Today, here at the Sofitel Sunrich Hotel in Guangzhou, FinanceFeeds hosted senior executives of large IBs in the region, alongside prominent retail FX brokerage easyMarkets.

easyMarkets is one particular company that fully understands the requirements of introducing brokers, as well as retail traders, as the company was one of the very first Western household names to actually establish operations in mainland China and successfully cater toward a large and loyal customer base.

Sun Yu, easyMarkets’ Chief Dealer, presented to the discerning introducing brokers, explaining some very important matters regarding the retail FX market globally, as well as on a local scale in mainland China.

Commencing his comprehensive presentation, Mr Yu focused on major facets that are important to FX industry professionals in China, including risk management, especially during periods of volatility, and transparency.

Reviewing the market structure in China, Mr Yu explained easyMarkets’ approach to risk, demonstrating that during the period after which the Swiss National Bank removed the EURCHF peg in 2015, the company honored every stop loss that was entered by all clients, hence having not exposed them to negative balances.

Additionally, Mr Yu, as part of his detailed insight into the importance of sensible leverage limits and secure custodianship of client assets, explained the company’s dealCancellation solution, which is a feature to allow retail traders to pull out of or cancel trades even if a position has been opened without loss to capital whatsoever.

easyMarkets senior executive Nicolas Shamtanis pioneered this product, explaining at its launch that as far as functionality is concerned, dealCancellation is effectively an option connected to the deal itself, therefore when a trader buys a spot deal, he is also buying an option to hedge the downside, in exchange for the cost of the premium. The premium is calculated based on market volatility.

“With regard to implementation to the trading environment, Mr. Shamtanis explained comprehensively how traders can pull out of open positions with no loss “When a trader enters his trade details on the platform, he can choose to activate dealCancellation from the get-go, which means that he already has the option to cancel this trade as though it never happened in the first place. Of course this comes at a small fee based on market conditions, which is usually less than the loss that might be incurred if the trade hits its stop. This way, the trader may minimize his losses to the cost of the dealCancellation feature versus the full loss on the trade” he said.

In China, where trust and the relationship between broker and IB is critical due to the ‘closed’ nature of information within the mainland, and the responsibility that IBs have toward their clients’ portfolios, this is an important means of ensuring a good safety net should a firm wish not to proceed with a particular trade.

One of the most divisive practices in the FX business these days is the banks’ privileged ability to pull out of or cancel trades that are not going in their favor, whilst all other participants from PBs to ECNs cannot do so. easyMarkets’ dealCancellation solution emulates the execution privileges often reserved for Tier 1 banks only, this having been very well received today here in Guangzhou.

Here is a full montage of today’s event, where important long term relationships are generated.

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