“Mind The Gap!” – The life and times of a man on the move Episode 85

Dean Koontz did everything except tell you to buy toilet paper 1981, and has it really been 45 years of trading? Yes, it has!

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

Who has run out of bathroom tissue? 

The answer is not just domestic households, but also large supermarkets from Cardiff to Calcutta and from Marlborough to Miami.

What a bizarre behavioral pattern, a mentality that demonstrates just how easy it is for the world’s government PR departments and the mainstream tabloid press to control and influence people.

Approaching seemingly intelligent people and asking them why they are loading giant supermarket trollies to the very top with bags of pasta, the answer would likely be that someone – the media or a talking head representing a political party – told them to do so.

Panic buying is a very peculiar activity. I have not seen it in developing nations on my extensive travels, nor did it exist during my life in Israel before I emigrated to the United Kingdom in 2019. Israel is a nation that is behind many third world and developing countries in terms of education, labor productivity and infrastructure, three aspects which are usually brought to the foreground when a major natural disaster – be it climatic or human disease – come to light, and the pattern remained that very few people resorted to these buying tendencies during the non-stop self-inflicted chaos and local disasters and conflicts that occur on an almost daily basis in Israel.

Yet, here in the civilized first world, panic buying is the only panic that ever occurs. British society is civil, polite, quiet and extremely efficient.

People in the UK are highly intelligent, pragmatic and sensible, and everything functions perfectly. There is very little bureaucracy and the modernity of the nation – especially plate-glass, ultra-sophisticated London – never fails to impress me.

Business in the UK is world leading, working practices are excellent and effectiveness with no drama are two key tenets, yet when the airwaves of the BBC mention a global virus, everyone heads to the fuel stations and the supermarkets!

A nation of avid readers and extremely well educated people, Britain should perhaps have taken the age-old words of American author Dean Koontz more seriously.

In his 1981 book “The Eyes of Darkness”, Dean Koontz wrote a prediction that has proven to be absolutely accurate.

“In around 2020, a severe, pneumonia-like illness will spread throughout the globe, attacking the lungs and bronchial tubes and resisting all known treatments” he wrote.

“Almost more baffling than the illness itself is that it will suddenly vanish as quickly as it arrived, attack again ten years later, then disappear completely” continued the prose of Mr Koontz.

Scientists in Russia and China have already stated that should the Coronavirus COVID-19 not be able to transfer itself to enough people, it will die out very quickly, a statement and line of thinking that has led many national governments toward the policy of ‘social distancing’ and closing down mass events.

Dean Koontz’s 1981 prediction also stated that it would begin in Wuhan, calling it “Wuhan-400” in his book, and using phraseology that could have easily spearheaded a conspiracy theory, by insinuating that it was developed using man-made microorganisms at a government center on the outskirts of the city of Wuhan, with scientist Li Chen defecting to the United States carrying a diskette (5mm magnetic floppy disk, commonly used for data storage in the 1980s), calling it “the most dangerous new biological weapon in a decade.

He goes on to describe its lifespan as a virus, and how it manifests itself in the human condition, and of course most of this was written for the purposes of entertaining the audience with a novel (excuse the pun), but his prediction, including the type of virus, its origin and the year, are completely accurate.

Dean Koontz fans, have you got a stash of 1981 toilet tissue stored in the garage?

Life begins at 45!

During a journey on the London Underground last week, I noticed a new set of advertisements in those very eye-catching advertising positions above the windows on the tube trains.

Billboard advertising is often somewhat ineffective these days, but the lines of advertisements that adorn the interior of the London Underground’s rolling stock are very prominent and effective.

This particular newly placed advertisements were from IG Group, London’s largest CFD company, and the particular part that caught my eye was a small script next to the IG Group logo which reads “45 years of trading.”

I quickly reached for my iphone – yes, there is wireless internet on the tube! – to check if this was not some mistake. Surely it can’t be 45 years already?

In the retail electronic trading world, product development times, structural changes whether forced by regulators or optional by companies wanting to innovate their trading environments and keep pace with the ever-increasing demands of today’s sophisticated and knowledgeable traders are so rapid that six months can appear to be a very long time.

Equally, many retail brands – admittedly most of them small MetaTrader 4 white labels with a focus on telesales rather than infrastructural investment and longevity – have come and gone in a very short time, therefore if six months is a lifetime, 45 years is an epoch.

Upon double checking, I could verify that it has indeed been 45 years since IG Group began its corporate journey.

Time flies when you are going from strength to strength

The company was founded in 1974 by Stuart Wheeler as a spread betting business under the name IG Index which was an abbreviation for Investors Gold Index which allowed people to trade gold prices as an index instead of buying the physical commodity.

It wasn’t until much later that the company expanded and became the vast domestic market giant that it is today.

In July 2000, shares in the newly named IG Group plc were first listed on the London Stock Exchange, and then two years later, IG Group commenced trading in Australia after a change in the country’s financial services legislation made it possible to offer contracts for difference to Australian residents, something that is now under massive scrutiny by the very same regulator, ASIC.

IG Group took the opportunity to acquire its founder’s shares, and those of certain other long-standing shareholders, in a management buy-out (backed by private equity firm CVC Capital Partners) which valued the company at £143 million; IG Group plc’s listing on the London Stock Exchange was subsequently cancelled on 7 November 2003.

In May 2005, after two years of private ownership, IG Group and CVC Capital Partners re-floated the company on the main list of the London Stock Exchange with a valuation of £393 million.

In October 2008, IG Group acquired FXOnline Japan KK, a Japanese retail FX business. In 2007, it purchased HedgeStreet, a small US based company that developed an electronic marketplace that allows online retail investors to trade financial derivatives. It renamed this the North American Derivatives Exchange or (NADEX) and has been attempting to use this to develop a product that looks like its binary option “digital 100s” product but that meets the US financial regulations by being offered via a centralized exchange and can be sold to retail traders.

Whether the trading community considers NADEX to be an exchange in its pure form, or an execution facility that uses IG as a counterparty, is a matter for debate, but as far as the NFA and CFTC are concerned, it does constitute a derivatives exchange, and since Cantor Futures Exchange moved away from these types of options, NADEX is the only one of its type in the world.

More recently, IG Group career executive Peter Hetherington, who spent over 24 years at IG, was appointed CEO in December 2015 when Tim Howkins retired after nine years in charge.

In September 2016, IG Group acquired DailyFX, a foreign exchange trading news and research portal, from FXCM for $40 million, a large figure indeed, but a milestone event conidering that DailyFX had for a long time prior, been the UK’s most used economic calendar, and therefore very important to IG when bearing in mind that the vast majority of the company’s client base is in its home market of the United Kingdom.

Peter Hetheringon, an excellent CEO whose leadership built on the strength created by his predecessor Tim Howkins, was a well known critic of the proposals by the Financial Conduct Authority in the UK after it announced new measures to overhaul the industry, publicly blaming the regulator for weakness in some aspects of implementation and its lack of understanding of what the proposed changes could bring.

Mr Hetherington resigned shortly after this and is now at Schroders Personal Wealth, but his legacy of strength and quality lives on at IG Group.

Looking back at all of these developments, including the company’s own infrastructure, its vast and knowledgeable workforce, and its huge profitability which largely stems from a loyal client base in its home country, the whole four and a half decades allude to the same conclusion that I drew many years ago and continue to hold today can be borne out, that being the need to invest in proprietary infrastructure and build a genuine business with genuine intellectual property.

IG Group, a giant with revenues in 2019 of £488 million and a highly successful public listing dating back to the early 2000s, has always had its own infrastructure and trodden its own path. Achieving a loyal home-market client base is a dream for most companies, removing the constant need to churn retail business to and from third party also-ran systems over which many white label brokers have no control or choice of product innovation, and keeping the cost down and the quality up.

IG Group do not need to beg for $200 deposits from inexperienced traders in far-flung areas of the world with no financial markets economy having paid $1400 for the lead which has already been passed from MT4 white label to MT4 white label and called several times per day with the same anodyne sales pitch.

Companies with their own trading system own their own client base. They do not need to churn, and they can list on prominent public exchanges because there is actually intellectual property to value, whereas MetaTrader brokers cannot list or sell their business because their client base is on someone else’s platform.

In summary, it is remarkable that 1974 heralded the beginning of retail electronic trading. Back then in the mid 1970s, only Hungarian stalwart Thomas Peterffy was beginning his American Dream with the establishment of Interactive Brokers, the largest and most successful retail electronic trading firm in the world, which Mr Peterffy led as CEO from its inception to just recently, and even then he kept his shares, demonstrating the faith he has in his company’s staff and subsequent leadership.

Today, Interactive Brokers concentrates on high end retail clients in the United States and other international markets, and eligible contract business, and is a fortress of strength, with a very good reputation.

It wasn’t until the late 1980s that innovators such as Josh Levy of MatchbookFX spearheaded the growth of proper retail trading with proprietary platforms.

Then along came CMC Markets, FXCM, GAIN Capital, Saxo Bank and Hargreaves Lansdown, a company that transitioned from an insurance brokerage to a comprehensive – and now vast – retail financial services company with its own Vantage system from which retail clients can control everything from their pensions, mortgages and ISAs to their CFD trading accounts.

Interestingly, HL Markets, Hargreaves Lansdown’s CFD division which is integrated into the Vantage system, is a white label of IG Group, and Hargreaves Lansdown’s incumbent CEO Chris Hill was previously CFO at IG Group.

It is great to see the big names such as CMC Markets, Interactive Brokers and IG Group going from strength to strength today, a testimony to good leadership and the fruits of investment in quality and infrastructure.

Wishing you all a super week ahead!

 

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