“Mind The Gap!” – The life and times of a man on the move Episode 35

Hedge funds and the FX revolution, Alan Partridge takes a sarcastic chip at gaming, IG Group proves us right in America, a retail exchange??, and the market maker vs STP conundrum rears its head at development level. These are revolutionary times, revolutionary view points!

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: London here we come, the resurgence is on!

This Monday, I embarked on a major task in terms of gaining a new audience from which our institutional electronic trading companies will most definitely benefit.

By new audience, I refer to a face to face audience, in London, which C-level executives from the institutional FX sector in all capacities from liquidity provision to platform development and market integration systems will be able to meet the C-level executives of hedge funds, wealth management companies, proprietary trading companies and professional asset managers.

I refer to the forthcoming conference in London, hosted and produced by FinanceFeeds, which centers on thought leadership at the very highest level within the financial services sector, in the world’s financial markets and FinTech capital.

London’s traditional wealth management sector dates back over 400 years to the merchant era, hence my initiative to actually meet with the leaders of long established firms, and on Monday, when arranging such meetings, my wish to attend their offices was met with a welcome which was as warm as if we were long term friends.

Meet the multi-million AUM wealth managers here, exclusively with FinanceFeeds

This means that the highest level of the professional trading and wealth management firms in London are looking closely at what the high quality institutional companies in our industry are doing, which is not just a good thing, it’s a fantastic thing.

For many years, I have found it very difficult to comprehend any reason why the FX industry, a business sector that pioneers trade execution, price matching, platform integration, news and analytics and has brought the highest level of trading experience into the living rooms of all and sundry who now have absolutely first class market access would waste their energy and defile their ground breaking efforts by providing their systems to low end affiliate marketers and MT4 white labels in third tier jurisdictions, most of whom either have no concept of what our industry represents or see it as a CPA/conversion effort as in low-rent gaming.

At best, this gives the business a bad reputation that it does not deserve, and at worst, it is a massive opportunity cost.

My message to all companies who have done so well over recent years to develop trading environments that are more cost effective and faster than exchanges, emulate professional desks and allow constant access to live markets by all privateers worldwide, and who lead the whole financial sector into the future is – why not meet the hedge funds and wealth managers of London? Why waste valuable marketing budget on absurdities in Malta or Cyprus?

Those are not the homes of the established, high quality client bases or B2B clientele that can drive your business forward and elevate the revenues and quality of your business that you work so hard to perfect.

The resurgence toward good quality Western markets is well and truly on, and I am very happy to be an instrumental part of it.

On May 7, Dow Jones, The Wall Street Journal and Market Watch will be fully covering our thought leadership conference in London which matches the leaders of the FX industry with London’s finest institutional hedge funds and wealth managers.

As I head off to meet the leaders of London’s establishment, I can see a massive light at the end of a tunnel for all of you.

And its about time….

Tuesday: One armed bandits, digital agitators and hacktivists. Alan Partridge is back, and he touches on a moot point!

Knowing me, Alan Partridge, Knowing you, the electronic trading industry. Aha”

For those who spent any time in Britain in the mid 1990s, Alan Partridge’s clumsy, innuendo-infused, socially awkward self-promoting diatribes would be a very familiar, and very amusing pinnacle of the televised comedy scene at the time.

British actor Steve Coogan’s portrayal of the bearer of an inflated ego, a Pringle golf sweater that his character Alan Partridge amusingly defined as ‘sports casual’ was a timely depiction of a man enduring a mid-life crisis, deeply embroiled in a desperate attempt to hold onto his flagging career at BBC Television via various strained conversations with the state-owned broadcaster’s Chief Commissioner, Tony Hayers.

Alan gives up on the cheese this time. He is back on the “BBC Gravy Train”

After an almost 20 year hiatus, Alan is back, and contrary to my skepticism, he is still very much the same brutally anti-social Alan that made us laugh to the point of heralding him as a national comedy icon all those years ago when IBM mainframes and 10-base-2 connectors powered the financial markets.

As it is now 2019, however, Alan has, rather unusually, kept relative pace with the times. Gone is his 12 inch dinner plate, dismantled Corby Trouser Press and strained conversations with Dixons electrical retailer staff on a hearing-aid-beige BT telephone about surround sound systems.

Gone is his incoherent relationship with Michael, whose Newcastle accent was incomprehensible to Alan, and gone is the awkwardness between Alan and his listeners on Radio Norwich.

Alan, looking as dapper as ever, has ditched the ‘sports casual’ range, has left the Linton Travel Tavern and has finally gained his position as a prime time talk show host, albeit peppered with phrases and mishaps that made him so popular in the first place, however he appears to have taken a dislike toward the ‘digital asset’ world, and has done so with, if I may admit, incredible aplomb!

He covers black hat hacking, and disruptive technological subcultures, which is not only incredibly amusing but also quite interesting, however the main point of interest here is that Alan goes into detail in absolutely pillorying what he terms “Land based terminals.”

“Why is this technology so addictive” asked Alan before embarking on a cliche-heavy, awkwardly delivered dressing down of gaming terminals.

The ‘stooge’ was placed to sarcastically demonstrate the ‘benefits of the land based terminal or online betting platform’ made a very standardized, amusingly content-free defence for gaming platforms, whilst Alan nervously looks to skate around the taboo and shut the conversation down quickly.

For those who saw it, this represented a clear depiction of why the retail FX and electronic trading business needs to do its absolute utmost to disassociate itself with the online gaming sector, as the two are totally unrelated and should never be placed into the same category.

The Israel and Cyprus-based affiliate marketers with their overt displays of arrogance and marketing spin have in the past created a totally unwarranted association at the low end, and that low end association has been damaging.

Those who do not know any better, should be isolated on the Eastern shores of the Mediterranean and left to their own devices. I cannot reiterate enough, they do not belong in our industry and no, I do not want to see trading platforms ‘gamified’ or another 120 decibel dialog in broken English about how the retail trading business came from gaming.

A few years ago, those who shouted the loudest made a beeline for this type of dubious practice, and were prominent at low-rent affiliate shows and trade exhibitions in third tier regions. Where are they now? The tranquility of their silence is music to my ears.

Gaming and gamification was not, and will never be part of our business.

Wednesday: LMAX gives up its Hong Kong license

With a retail brokerage in New Zealand to onboard b-book client bases in the Far East, and a strong direct client base, it is clear that London based LMAX Exchange places a great emphasis on retail business, which categorizes it as a retail brokerage.

This Wednesday, it became clear that the firm had canceled its license to operate as a regulated entity in Hong Kong, the Hong Kong SFC having placed a notification on its official website.

Speculation as to why a company providing institutional services would take this step amassed, with one London-based executive considering that 30 million Hong Kong dollars is required as clear capital by the regulators in order to hold a Type 3 license, which is not necessarily attractive for retail firms, as Hong Kong is, rather similarly to Singapore, a destination for banks, hedge funds and institutional liquidity providers rather than retail brokers.

There is a lot of ambiguity over the exact sector within which brokers providing services to other brokers operate. This is why moves such as this should be treated with trepidation.

Thursday: IG Group opens in the US, gets it right first time

FinanceFeeds was the first to report that evergreen British publicly listed brokerage IG Group was making the very worthwhile stride back across the Atlantic to North America, representing the first electronic trading entity to re-approach the best market in the world following a mass exodus of those who simply couldn’t hack it some 8 years ago.

Since IG Group’s application to the National Futures Association to register as a Retail Foreign Exchange Dealer (RFED) and Forex Dealer Memmber (FDM) over a year ago, the firm has made great steps toward leading the retail market back to the United States.

Opening its doors in Chicago last week, the company quite rightly re-entered the market it knows so well with intent to ‘shake things up’ in what has become almost a monopolistic environment by proxy, as those who did not have the mettle to adhere to the United States’ very pragmatic, customer centric, proprietary platform-orientated requirement left or were asked to leave some years ago

I spoke to many listed derivatives executives whilst meeting in Chicago at a private event hosted by FinanceFeeds, and the general consensus was that IG Group is, to quote one executive “Welcome back with open arms” to the US market.

I believe they’ll do well, and the initial steps are positive. Just a day after opening for Stateside business, it was officially confirmed that the company’s first introducing broker in the Land of the Free is Forest Park FX, one of the only NFA member Introducing Brokers that exists, operated by longstanding FX industry senior figure Justin Hertzberg.

This is a very good approach, and I wish Justin and IG Group the very best with this venture. It, as FinanceFeeds has stated for many years, is the way forward.

As per this video, we advocated this long ago.

Friday. No margin brokers took up the STP system? 

Speaking to a platform developer in the APAC region on Friday, an interesting point emerged, that being the perceived reluctance by retail FX brokerages which purport to be offering ‘straight through processing (STP)’, whether to a 2nd tier non-bank liquidity provider or directly to aggregated Tier 1 liquidity provided by a prime of prime brokerage, shied away.

The developer of this particular platform has reached a similar conclusion to me in that the beast that has been created by the introduction of MetaTrader in 2004 has been born and raised on closed platform market making and that particular sector has no concept of genuine risk management, matching engine use, liquidity management or market integration.

There has to be another way. Ah yes, there is!

Indeed, despite offering this particular platform to brokerages, my astute friend at the other end of the Pacific asked me on Friday “Is there any advantage in being an STP broker over being a market maker? I remember a large broker in this part of the world having regrets some years ago when it entered the European markets as an Australian regulated STP broker, and is now back as a market maker. And by market maker I don’t mean a firm that internalizes some trades but sticks to prices given by a prime brokerage at a bank, I mean making their own B-book market.”

“To do this, the founder had to buy out all the other shareholders and as the story goes some FX margin brokers in Australia want to conquer Europe, but they are MT4 brokers so what do you think their edge is other than leverage? I mean a real STP, with real liquidity partnerships, not simply a MT4 white label offloading exposures to its own parent company which is a totally B-book market maker” he asked.

I see his point totally.

This highly astute individual will make his way half way across the world to our London conference in May. There, he can discuss, along with many others who understand the business well and operate their well capitalized, long established firms on the basis of effective market execution and genuine prices, and we can take our part in forging important partnerships between our industry’s leaders, and a far better client base.

Now that’s progress!

Wishing you all a great week ahead, as I head for the airport. Hopefully this time the airline hasn’t had a visit from the receivers!

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