“Mind The Gap!” – The life and times of a man on the move Episode 9
Soda Stream vs international business, a new transparent era for retail FX brokerages, rest and relaxation, China from a trader’s perspective and a lead-buying hit and run
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: Propaganda over substance
Propaganda has become such a widespread method of swaying public opinion on every aspect of life these days, largely due to the immediate access to all kinds of media which allow all and sundry to create conversation, debate and discourse into a public arena.
Of course, propaganda has been relied upon for many generations by those wishing to sway power, be it political, social or commercial, however until the last fifteen years which has heralded the absolute prominence of social media, the use of falsehoods and imagery for the purposes of brainwashing the general population was the preserve of despotic governments and not small special interest groups.
Most mature adults of sound mind would often steer clear of internet-based attempts to gain attention or serve an often unbiased purpose, however this Monday my attention was caught by one particular group of extremists whose propagandist cause dominates their everyday existence on the mortal coil.
Very recently, there has been yet another extremely divisive measure taken by a nation which is supposed to be involved in international high technology business at a high level. By this, I refer to the Nation Law invoked by the State of Israel’s Likud government, which, however it is dressed up as a reaffirmation of self-determination in a national homeland, is actually extremely discriminatory and, unlike any other nation whose main business activities revolve around modern technology which can be sold to a global audience, demonstrates an exclusionary policy which will not only alienate the progressives of the world, but also global business.
I have already highlighted the ‘closed shop’ nature of business and society in Israel, which makes the inflow and outflow of capital very difficult due to the cartels that do not allow foreign banks or global enterprises to exist and flourish, however the new Nation Law will likely be very damaging for business in other ways, too.
This may well be no surprise to many, however there is a large proportion of the population whose propagandist nature (as is common in many extremely nationalist countries, particularly outside the developed West) has led them to fan the flames of the Nation Law, some of whom, as per my interaction with one of them on Monday, are professors at some of the countries top universities and have not only a high level of education, but also a vast amount of influence.
I asserted that the Nation Law will create major issues for global companies wishing to invest in any firms in Israel, or for Israeli entrepreneurs to be able to attract overseas M&A deals because due diligence will never agree to transfer capital to family-owned, non aligned banks in a nation which gives preferential treatment to some and not others (the ‘others’ in this case being the exact people who would invest from abroad!) and also would not be able to grow businesses by sending executives from an acquiring company to Israel for a few months to build executive teams, because said executives would be treated as second class members of society (they would not be allowed citizenship) even though making a contribution to business, which in Israel, is vastly needed.
The dialog was extreme and in some cases, extremely unpleasant, as the flag-wavers resorted to absolute vitriol against all sensibility to defend an odious ruling that will destroy the already very barren business environment in an increasingly isolationist region of the world.
Last week’s acquisition of Soda Stream by PepsiCo of is now being used as an ill conceived method of trying to make these fears appear unfounded, however due to the Nation Law and inability to do any business from the outside, or the increasing dislike of foreign influence, this $3.5 billion acquisition does not represent a major victory for one of Israel’s most famous household names (and one of the only ones to ever succeed abroad) but actually signals the end.
It is likely that PepsiCo wanted Soda Stream’s IP so that it could produce more healthy soft drinks and improve its public image, however the obstacles, the Nation Law, the boycotts plus the baying mob, will prove too much and my estimate is that PepsiCo will relocate it to North America, provide green cards for its senior executives and close the rest down.
One particular slinger of mud used the usual absolutely incomprehensible ruse that Israel is ahead of all nations in terms of technology (insert look of disbelief here) and that anyone who dares to challenge this should be pilloried. “Ye Olde Englande” was cited by this particular individual as having stopped its technological development at the completion of Stonehenge. Never mind that the United Kingdom is the fifth largest economy in the world, and home to thousands of publicly listed international technology firms in every sector.
I thought on second glance that the name looked familiar to me, especially when this particular individual boasted that he had started up a couple of Israeli high-tech firms. Then the penny dropped. He was the owner of a binary options firm that is on the CFTC fraud list and is wanted by the FBI.
High tech, my foot.
Tuesday: Brokerages, new services for you are here!
There has been a significant period during which retail brokerages have had to offer very similar products to each other, especially those reliant on third party platforms.
This Tuesday, however, a very substantial light at the end of the tunnel began to shine, as I spoke to two companies, both run by very experienced FX industry senior executives, which are now beginning to offer some very high value products for retail traders which aim to bring greater transparency to the retail FX market.
The widespread use of MetaTrader 4 in the mid 2000s led to an affiliate marketing-led method of onboarding customers, which in turn led newly inspired traders to subconsciously believe that they are a target for deposits, and not much more than that.
In today’s far more advanced world of retail FX, the plethora of traders that were brought into the fray by the ease of market access afforded by MetaTrader 4 are now highly experienced and require sophisticated tools to not only measure the lay of the market, but also the quality and integrity of their brokerage.
Pavel Khizniyak, a whose career in the FX industry began at Forex Club’s New York office in 2010 as VP of Global Institutional Sales and Member of the Management Board leading to a tenure at senior level at the firm’s Shanghai operation, before he founded Trade Exact Consulting in 2013, is about to unveil a new service.
Whilst the full detail on this is yet to be officially announced, my brief chat with Mr Khizhniyak this week gave a short insight.
“Over the last few years I have been developing a new service for retail traders to make the trading environment more transparent, and am planning to take it live this Monday” said Mr Khizhniyak.
“It is not a broker, but an execution analytics service which is free and visual” he explained. “Currently it is a placeholder but it will open in three languages (English, Russian and Chinese) on Monday” explained Mr Khizhniyak.
“We currently have a patent pending on the technology we use because we are the first to offer millisecond precision and real-time analytics of tick by tick data as an ancillary service” he said.
“As I see it, there are a lot of opportunities here for regulators and brokers, because we can offer a number of services to brokers with a separate portal, hence brokers and regulators can use our Composite Index as a benchmark for the execution quality of trades. We lso have technology that is compliant with the US regulator’s Transaction Reporting Execution Surveillance System requirements to evaluate the quality of broker price feeds and system uptime” explained Mr Khizhniyak.
“We can help brokers evaluate and identify latency on some of their instruments compared with the market, which will help protect them from toxic trading activity such as scalping” he explained.
This is, if all goes to plan, very encouraging and is a welcome addition to a growing sector which currently is held by very interesting companies such as Jeremy White’s VerifyMyTrade which brokers can use to provide to clients to ensure that they are getting a correct market price, thus creating more trust in a broker for an existing client, leading to what many MetaTrader-based brokerages lack – a loyal client base, that being usually the preserve of large firms with proprietary systems.
In September, I will be traveling to see another new development on this ideology by another very well recognized FX industry senior executive, and will be reporting from within that particular company and meeting its developers. This particular entity is well and truly ‘in’ with the regulators globally, and I look forward very much to visiting their offices and reporting in detail about the product.
In my opinion, any development company that produces software and services that genuinely advance the cause and transparency of retail FX is a welcome addition to the industry indeed.
Wednesday: R&R is vital
This week, I did something very unusual indeed, which was to take a few days away from the desk, starting from Wednesday.
Work ethic is vital, but as I have now learned, so is a degree of removal from the screen and focusing on a bit of rest. It makes a huge difference and whilst we are all commendably hard working across every sector of this industry – something that I respect tremendously – a bit of time out serves well.
Thursday: China is passe?
It has become a very common perception in the FX business that the once extremely lucrative chance at a stab at the Chinese market is now spilling beyond the strictly controlled borders of the mainland and those with large, sustainable business – usually introducing brokers with vast client bases – are now beginning to conduct the exact same business via other regions of South East Asia.
My own experience in this bears such views out, as over the last few months, my own professional involvement in placing Western firms in front of key strategic partners in the APAC region has become very centered on Malaysia, Singapore, Thailand and believe it or not, Vietnam.
We even see firms closing down their mainland Chinese offices and moving them to Kuala Lumpur, or relying on specialist consultancies in Malaysia and Thailand instead of keeping a Wholly Owned Foreign Entity in China.
On Thursday, I spoke to an institutional trader about this, who is unrelated commercially, and happens to be a friend of mine, based in Canada.
We often hear about the dynamics of the industry in China from our contacts at senior level within the industry itself, however it is interesting to hear a trader’s view this time.
My pal asked “Has anyone verified, or has there been rumours to the effect that in the past several weeks the Chinese have effectively closed most of the payment pathways for chinese residents to fund Western FX broker accounts?”
“I have seen the fining of two payment firms AUD $10,000,000 each for allowing payment gateways in and out of China’s mainland, and I have seen the Chinese government continue to close down access to the websites of Western FX margin brokers so that Chinese residents cannot access them.”
“Or from a longer term perspective, we can look at how effectively the tap has been turned off since mid 2017 into 2018. I see the metrics at the brokerage which I not only trade with but also am on the advisory board of but I also see evidence that other Australian brokers are being affected and then, where do they go, the brokers if China is turned off? Some Australian brokers are looking at Europe, having abandoned their STP model for market making, or more likely Chinese communities in other Asian countries such as here in Canada.”
“Anyway – no matter what, as the ‘media’ focus is on FX margin brokers, the poor retail trader is cannon fodder. 80% + consistently lose money no matter what the broker offers them – perhaps unique amongst financial services firms that such a large percentage of clients lose money as the earnings of the broker which is such an antiquated model” he said.
Interesting and quite correct from what I have experienced. Europe, however, is not really likely to be the target of many non-European brokers, especially those in Australia as that is one of the most highly respected areas for FX brokers in the world, and my experience of the leadership of companies in Australia is that they are extremely professional, and run by very knowledgeable and highly well organized teams.
South Africa is one region of interest by many. There is huge Chinese investment there and it is a well organized and well regulated financial markets economy with excellent banks. Watch this space.
Friday: Human error is not the issue, its recognizing it that counts
A big wooden spoon on Friday goes to the myopic oaf who reversed into the front of my car at a gas station, then proceeded to argue with me about it as though it was somehow my fault even though I was standing outside my car, before driving away quickly so that he could not be held accountable.
There is no damage, but that is not really the point. The ‘entitlement’ mentality is what has led to short sightedness of another kind, that being the lack of development of proper business and the often misappropriation of client money.
After some expletives were foist upon me, and my regaining my place in the drivers’ seat having learned a few additions to my vocabulary, it was apparent from viewing the sticker on the rear window of the car as it sped away that it was a company car belonging to – yes, you have guessed it, a marketing firm that supplies leads to binary options and gaming firms.
Wishing you all a great week ahead!