“Mind The Gap!” – The life and times of a man on the move Episode 16

In this weekly series, I look back on what stood out, what was bemusing, amusing and interesting during my weekly travels, interesting findings within the FX industry and interaction with an ever-shrinking big wide world. This is purely observational and for your enjoyment.

Monday: There is no need to be stuck in a rut with MT4

Once again, last week began with a subject of conversation that regularly materializes, that being the prolonged absence of differentiation between a large proportion of retail FX brokerages which use a full solution from MetaQuotes and base their entire product range and client hosting on the MetaTrader platform and its associated server and infrastructure.

It is quite interesting that such a long period of time has gone by in which a market dominating suite of enterprise software has existed for fourteen years. Most software becomes ‘legacy’ after a lifespan of just one year.

Indeed, since the latter part of the previous decade, MetaTrader 4 has dominated the global retail FX business among brokerages which do not develop their own platform, and has done so for several reasons which are not necessarily attributable to the quality and flexibility of the actual platform itself, but more as a result of ease of transferring customer bases between brokerages and the MetaTrader 4’s innate compatibility with important self-programmed Expert Advisers and ancillary services that are critical to brokerages due to their proliferation among high volume IBs and portfolio managers in the Asia Pacific region.

The downside of this is that value propositions have become very marginal and, as highlighted by FinanceFeeds in detail, a race to the bottom in terms of brand positioning and marketing.

Most certainly, many brokerages are aware of this, however any activity to resolve it has either been very slow compared to the advancement of new means of attracting a different audience by many other online and e-commerce industries, hence it would be perhaps appropriate for Norris McWhirter to consider the MetaTrader platform for entry into the record books as the longest serving mainstream commercial software in history, if he had not passed away in 2004, the year that the MetaTrader 4 platform first saw light of day.

Once again, it has taken a combination of Chinese ingenuity and British business acumen to begin to challenge the status quo.

On Monday this week, I met senior executives at TigerWit at the firm’s London headquarters. Perhaps somewhat misunderstood, TigerWit is far from the standard MetaTrader based brokerage and whilst its core product range is centered on FX, CFDs, precious metals and crude oil, itself a very standard range of OTC instruments which are commonplace across most retail platforms, the means by which the MetaTrader platform connects to the market and to trading infrastructure is noticeably different from the mainstream.

Instead of operating the traditional MetaTrader front end which would ordinarily be connected to a combination of internal dealing desk execution faculties and liquidity from either another retail firm or a prime of prime brokerage and having internal dealers decide whether to internalize trades or send them to a liquidity provider who then may also internalize them, with small amounts of flow then going to a genuine prime of prime, TigerWit’s methodology is rather more peer-to-peer orientated.

Originating in China, TigerWit is an example of ingenuity from the APAC region being implemented into Western business, and steered and led by British expertise. The firm’s ethos is very interesting in that it maintains the familiar front end that is utterly dominant in retail FX, does not divert from the compatibility that many IBs and portfolio managers worldwide have become accustomed to with their trading tools being very MetaTrader-centric, yet aims to get around one of the most important and often deal-breaking obstacles in retail FX, that being the ability to trust a retail brokerage which has a third party platform with handling a trade correctly and in a transparent manner.

The company uses a cryptographically encoded distributed ledger system to create a detailed record of transactions which are shared throughout the trading network.

By using distributed database software, the wider trading community is responsible for the operational chain of events and their outcomes, rather than a broker with an opaque window to a dealing desk.

It is a great melding of modernity and familiarity, which ultimately is what notoriously conservative retail traders are looking for.

Tuesday: Web development and hay barns

It is well known internationally that London is a world center for pretty much every enterprise and global commercial industry sector that exists. Its ultra-modern, highly sophisticated presence being absolutely dominant, and its millions-strong talent base being among the most knowledgeable in the world in more or less every business that exists.

Unlike the United States, which is livable from coast to coast and border to border, with metropolitan cities of excellence in the West Coast, East Coast, MidWest, and South meaning that middle-class America is never stuck for activities, social diversity or business opportunities in any region of the country, England is somewhat different as it is almost completely London-centric.

Whilst coal is being shoveled onto the open fires of the 85 cities and towns north of Birmingham and pre-industrial revolution antiques adorn equally period hallways, London’s immaculately suited arsenal of detail-perfect geniuses are continually improving their own causes and powering the world’s future with relaxed aplomb, articulated with cut glass Queen’s English received pronunciation.

I am equally London-orientated. I lived in the Capital for 12 years, and have witnessed its propulsion to being a separate demographic, lifestyle and commercial center to the rest of the UK, with more in common with New York, Tokyo and Shanghai than anywhere even 50 miles away.

Doilies, mustard-colored council estates, scones and traditional English beigeness may hang like the winter fog over the provinces, but London bears absolutely no resemblance and is an absolute contrast. Anyone who has lived for any period of time in London will not be able to compare their every day lifestyle to anyone who lives elsewhere in the UK from a cultural, epicurean, professional and social perspective.

Consequently, it is a magnet for the UK’s highly energetic and talented populace, many of whom complete their education and then move to London, creating an even greater difference between the capital and the provincial backwaters.

I have even attempted to encourage FX brokerages, whose businesses are completely operated on an online basis, to establish offices in other parts of the UK, where the FCA licenses still holds just as true as it does in London, where the internet is equally high quality, the proximity to important hosting centers such as Equinix LD4 in Slough is similar, and where costs are exponentially lower from real estate to staff remuneration. Nobody moves. London holds true and will always do so.

There is one exception, however, and that is web design. Web design may well be the bete noire of over-40 longtermers like me, who regard such people as bearded hipsters with no commercial responsibility and to whom Nespresso machines and ungainly metal facial adornments take precedence over accuracy and diligence, however we as an online business should consider web designers as a key requirement to our business.

In the UK, there is an area that is becoming a web development, digital marketing and SEO center, with several high quality developers who have had a first-rate education being able to fully understand the full remit of developing and operating a proper corporate website including its interaction with Google, and how to develop custom mark-up code to get it just right.

Rather surprisingly, the region to which I refer is the south west. Cue the mildly amusing japes about farmers, pirates, home-made cider produced by treading apples with bare feet and lack of gene pool diversity, however that would be extremely churlish.

Exeter, a small city in Devon, England, some 225 miles (362km) from the nation’s capital, has become a major center for young and very knowledgeable coders.

Whilst other core aspects of our business – notably liquidity management, compliance, prime brokerage, technological integration into global electronic markets, operational and corporate strategy as well as looking after discerning B2B clients – rely heavily on expansive expertise and a clean cut corporate suit, it is, unfortunately, the coffee shop hipsters that often gravitate toward web design who, although unable to haul themselves out of their hemp-sack beds at a timely hour, and whose grasp of the English language is in some cases very questionable and peppered with absurd attempts at Australian back packer slang, are fully wired the correct way when it comes to getting the site content right and its interaction with other internet components absolutely spot on.

The reason for this is that Exeter has one of the country’s most sought after second-tier universities. By second tier, I mean it cannot compare with UCL, Kings College, the Oxbridge set, Imperial or LSE, however it is equally as prestigious as Bristol or Warwick and has a massive international center, where economics dominates from the Devonshire countryside to the center of Beijing.

This has created a draw from other upper middle class parts of English educational fraternities to Exeter University, hence the post-graduate internet design geniuses do not hail from the West Country but often stay there and establish their web design firms with fellow former students, all of whom are often highly educated, and are attracted to stay due to the laid back lifestyle and far lower costs than would be the case in London, and let’s face it, the average lentil-chomping liberal with an aversion to razor blades does not care for the competitive capitalism of London.

That same hipster, however, would welcome London based custom and prosper from it, and is likely to prioritize your work as it is a stream of good income which is far more fruitful than designing a front end UI for a local primary school. FX brokerages have comparatively massive marketing budgets and rely heavily on getting the ‘shop window’ website absolutely right whereas local West Country businesses are often very old fashioned and do not need such finely honed web presence or SEO.

Thus, I would recommend it. I visited some web agencies in Exeter last week and found them to be highly astute, very knowledgeable with regard to what to get right and what not to do when designing a website for an FX firm or service provider. They are young, dynamic and capable. And a LOT less expensive and more committed than those struggling under-25s in Camden.

If anybody would like any recommendations, please let me know.

Meanwhile, peace man, I’m off to chew on a lentil.

Wednesday: Cyprus = tourism, so let’s use the tourist system ourselves!

The island of Cyprus is synonymous with the retail FX industry to the point that it is home to over 170 retail FX brokerage licenses and over 3000 currently employed FX industry professionals, in a nation with an entire population of only 800,000.

Almost every person who has ever worked in FX will have had several interactions with Cyprus based entities, even if they are a marketing intern based in Australia.

To those who are not part of our business and its associated wider society, however, Cyprus is a longstanding and incredibly popular destination for tourism, its government giving tremendous incentives to operators of any form of hospitality, and its shores welcoming over 4 million sun-seeking visitors every year.

The entire nation is absolutely focused on relaxation and fine food for all age groups from all over Europe, Russia and the Middle East, and its former status as a British colony having given rise to a massive connection between the United Kingdom and Cyprus with several thousand people owning second homes in Pafos, Limassol and Agia Napa.

There are also a large number of ‘British Cypriots’ – people who were born in Cyprus and had spent their educational and initial commercial life in England before returning to Cyprus, or diaspora Cypriots born and raised in England before moving to Cyprus later, further deepening the connection between England and Cyprus.

Hence, for business, we see many executives from ancillary service providers, brokerages providing B2B services to retail firms, prime brokerages and platform vendors visiting Cyprus by using a standard scheduled airline.

Indeed, Cyprus is only a four and a half hour flight from anywhere in the UK or three and a half from Moscow (Less from Ukraine or some of the more south westerly parts of Eastern Europe) but the propensity toward using standard flag-carrying airlines for business trips is ingrained.

There is no need, however. On Wednesday I traveled from Bristol UK to Larnaca on, if you can contain your laughter, a Thomas Cook flight.

Yes, it was the winged equivalent of a Butlin’s camp, and was carrying over 150 grockles to their “England with sunshine” style package resort which will likely provide endless televised sport presented with a broad Manchester accent, orange-tanned stand up comedy from the music halls of Romford and some extremely unpleasant 1970s English breakfasts, but if it’s just a four hour flight you want, who cares?

Cost is everything these days, and if a sales person from the UK can visit Cyprus for less than $120 (I am not joking!) and rent a car at the airport to then drive to tens of appointments across Limassol and transfer the cost saving to the retail brokers who also really need cost efficiency these days, then it is doing us all a good service.

Keep the appalling food, weird lottery ticket sales and odd questions away by putting your headphones on, and then the whole thing makes perfect business sense.

I’ll be using that again, and would recommend it to all. The more cost savings that can be passed down to the broker, the better in this era of analytical purchasers and tight margins.

Just don’t start wearing Hawaiian shirts and knee-length white socks, or carrying a plastic balalaika. That would be too much.

Thursday: Caveat Emptor! The bogus ‘broker solutions providers’ are at it again

Talking to a good friend of mine in Limassol last week, it appears that once again, brokerages are being approached by unpleasant individuals who are promising them a top quality turnkey solution for their brokerage at what is most definitely a set of terms which is too good to be true.

In this particular case it is too good to be true because it quite simply is not true.

A customer of a technology development agency in Cyprus with whom the friend of mine to which I refer works closely, regaled his appalling experiences to said friend of mine, who in turn spoke to me about it this Thursday.

A privately educated British FX brokerage owner, who has been residing in Hong Kong for many years, is now establishing his operations in London.

This particular gentleman purchased a white label solution from a company called YourOwnBrokerage.com and despite paying them in excess of $24,000 has been completely sidelined, according to the account that was relayed to me.

I have seen the documents that have been signed by both parties, and all of the terms and conditions have been agreed to by both sides, however, according to the individual concerned, the firm has “run off with the money.”

The brokerage owner sent a demand to them and gave ample time to reply, but silence has dominated, and no calls or emails are being answered.

This is not a case of a naive newbie either, as the person concerned is a former JPMorgan partner and has an extensive background in institutional financial services. It was quite rightly explained to me that “unfortunately people from civilized business environments can do, because they are used to efficiency and honesty.”

Indeed so.

Viewing the site of the firm that is being accused of this, it shows a US phone number, and boasts “Our extensive knowledge of the payment processing business, as well as industry contacts, enables us to provide clients with insights on industry trends and current market/business practices.”

It also offers the provision of an FX licnese however this appears to be an offshore ‘license’ – there is no such thing. Yes, there is Belize or the Marshall Islands, but that is hardly a license. Among the plethora of offshore islands listed, the firm does purport to offer ASIC registration, FCA licensing and CySec licensing, however any external consultancy that can successfully obtain an ASIC license for a margin FX brokerage, I hold my hat off to, because even doing so directly via dedicated lawyers often does not result in the granting of a license, as these are very hard to come by.

I would recommend sticking firmly to the firms well known in this industry, they are dedicated specialists and have most of the brokers on their books. Firms such as oneZero, Gold-i, PrimeXM, Fortex, or Integral should be the go-to for liquidity management and market integration, and for starting up a brokerage, a specialist lawyer such as MAP S Platis in Cyprus or Sophie Grace in Australia.

The website of the firm concerned here continues to provide information and has a US telephone number and an address in Portland, Oregon, however the area code 518, which is the main listed number on the website, is Upstate New York, therefore showing that this is a leased line from a VOIP provider outside the United States and that this really is not a US entity. In the US, offshore brokerage is illegal.

There is even a series of odd statistics showing how many ‘successful clients’ the firm has, as well as server uptime and how many orders are executed daily, along with a live chat facility, hosted by “Chris”. .. Yes, and my name is William Shakespeare.

Friday: Multi asset range of your products for FX is almost here

There is soon to be a new connectivity solution that will provide a range of listed futures products from major Chicago-based derivatives exchanges such as CME and ICE to brokerages using the MetaTrader platform.

It is most definitely a natural progression that is required, especially considering that brokerages will be able to offer OTC and listed derivatives products on one MetaTrader platform, thus not alienating core business but also being able to onboard futures and derivatives traders, reducing any leverage liability and gaining access to a whole new band of traders whose minimum deposit sizes are usually over $50,000 and who trade semi-professionally for several years at a time.

Sustainability and future-proofing (pardon the pun) are both vital in this ever-regenerating industry.

I spoke on Friday to the Chicago-based group of 30-year experienced futures industry professionals who are launching it. Watch this space, it will be detailed here in full very soon.

Wishing you all a great week ahead!