“Mind The Gap!” – The life and times of a man on the move Episode 43

FX should be like electric scooters, IPOs and pie in the sky, Let’s move to England, and your move to the top

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: Sharing is caring – and it’s the future

Has anyone noticed the proliferation of electric scooters that now adorn pretty much every street of every city in North America and Israel with the exception of San Francisco?

These lightweight skateboards with handlebars and a 12v battery are literally everywhere, and appear to be mainly provided by three Silicon Valley companies, BIRD, Lime-S and WIND.

BIRD is Uber, hence this is not a whim.

The idea is that absolutely anyone, whether a city resident or not, can download a smartphone application from Google Play Store or Apple AppStore, using their debit or credit card as a means of security, can simply sign up very quickly, then via an easy to read map, can simply locate an electric scooter within very short walking distance of any current location, scan the QR code and away you go.

My own use of this service to perform local tasks has absolutely changed the way I look at not only local journeys that are too short to take the car, but also every single retail audience focused business.

There is literally no point owning your own bicycle or electric scooter anymore, because the maintenance, charging logistics and risk of loss due to theft are hindrances that are now absolutely obsolete.

I can remember many commuters having to find places to charge their electric bicycles whilst at work, manhandling them into elevators or past very disparaging concierge jobsworths, before wrestling with 12v chargers or insurance-approved heavyweight Oxford locks.

This is at best an absolute faff, and at worst a rigmarole that nullifies the benefits or electric bicycle ownership compared to walking short distances.

All of that is now a thing of the past, and other firms have grasped this method too, meaning that sharing is now the new ownership.

The absolute virality of this has led to a massive mushroom effect everywhere, apart from San Francisco whose city department banned them as it said they were littering the whole city – ironic considering that is where they hail from. Still, the virality is an indicator that this is what people want.

Many of those who know me well will be aware that I have a particular admiration for Volvo and its engineering ethos, which combines very clever thought leadership with leading edge technology and always has done since founder Assar Gabrielsson famously said in 1924 “Cars are driven by people” indicating that safety and the human interface were important.

These are literally everywhere

Volvo has also embraced the sharing, which has begun as a subscription based feature on its small SUV, the XC40. On that model, Volvo’s On Call subscription now includes Car Sharing via a standard equipped Red Key. This feature enables owners’ family and friends to use your XC40 through the Volvo On Call app without the hassle of having to schedule a key exchange. Brilliant.

I have used OnCall on my XC90 to point me in the direction of useful facilities in an area ive never been to before and even book me into a hotel there, but this takes it further.

What can we learn from this? Quite simply that modern consumers love apps and want everything at the touch of a button and as a full service package with no ownership or maintenance.

This is a perfect lead for the FX industry to follow, as we are geared up perfectly for that.

Why do brokerages tie themselves up to third party affiliate-style platforms that do not empower their business and where the only intellectual property is a very easily transferred client base of one-off customers?

Who is going to bring about the first genuinely broker-agnostic service where traders can be mobile-only, and make a trade on a real time basis using a prime of prime brokerage-style aggregated price feed, and then the app simply executes it on whichever brokerage is first to respond or accepts the trade?

RFQ systems in institutional firms have worked that way for years, but via operation by a full time employed, desk bound member of staff.

The retail sector could easily generate far more revenues by embracing a sharing model and having one app for all brokers.

As Norman Tebbit famously said in the early 1980s when encouraging people to start their own businesses and be self-sufficient, “Get on your bike!”

Very apt.

Tuesday: IPO dreams and harsh realities

On Tuesday, I approached the owner of a well known and long established MetaTrader-based brokerage which has operations in London and Sydney, because I wanted to know what the firm’s plan is now that the Australian financial markets regulator ASIC has prohibited the servicing of clients from outside Australia.

This particular firm, which began its operations in Chicago many years ago and has had a head office in London for a very long time, has generated a significant proportion of its revenue from Chinese IB networks, being administered via the Australian office.

The company also considers its value to be over $100 million, as it stated in July last year that it intended to list on the Australian Stock Exchange ASX, valuing its IPO intention at that lofty figure.

GAIN Capital IPO
Going global via IPO? I don’t think so unless you have genuinely your own business

I have said before that the reason why so many FX firms with substantial revenue figures do not list their stock on public exchanges is because if they are subservient to MetaQuotes, the auditors from professional services firms such as PriceWaterhouseCoopers or KPMG will deem that there is no intrinsic value and no intellectual property because the entire infrastructure and customer base is all on someone else’s servers – in this case MetaQuotes.

$100 million may well have been pie in the sky last year, but now it is more like halibut thermidor with beluga caviar in the sky.

One Australian commentator on Tuesday observed this and said to me “Maybe out of the depths of this plague on FX margin brokers offering toxic product to retail mug punters, the industry maybe blind sided by recent regulators breaching their baracades, when this high risk low cost DEX [hybrid] model has been progressing under the radar. A couple of brokers have undertaken this, both of which are existing OTC FX margin brokers one in Hong Kong and one here in Oz” he said.
others of course were ICO as new brokers either as crypto platforms then evolving to FX as FX margin brokers offered crypto currencies

“This is most interesting, as in any evolutionary path, their will be many options and some failures, but the driver can be tht clients funds are held away from the broker platform, leveraged as high, as long as tokens and not securities, which makes use of pretty loose regulations.”

He was indeed referring to the firm in question. That firm has now gone down the very dubious token route. That means that an IPO looks very unlikely as I said a while ago, and when asking the executive from that firm for his perspective, I was ignored.

Discretion is the better part of valor, however if you THINK a bit, you can guess who it is.

Thursday: Who is up for setting up in England?

Note that I say England, not London.

London is, and will for as long as the entire global economy follows its current form, always be the absolute epicenter of the financial markets economy and the technological topography that powers it.

Everyone knows that and most people who observe my views will also understand why I consider it to be the linchpin of our industry and the savior of our future.

This Thursday’s brilliant revelation by the British government that it will make a metaphorical two finger salute to socialist Europe’s unfriendly and bureaucratic approach to regulation and keep London’s financial miracle at the forefront and lower the burden at the same time.

Is this Chicago’s Wacker Drive? Nope. It’s Manchester. Let’s go

FCA CEO Andrew Bailey said that Brexit “will be a defining factor” in the construction of a post-EU regulatory regime and the FCA’s approach. Mr Bailey explained that “left to our own devices, the UK regulatory system would evolve somewhat differently” to that of the EU regime, with the country’s regulators emphasizing “principles” gained from “practical experience”, over “detailed rules that can tend to become overly set in stone”.

Good man. This goes hand in hand with the Conservative government’s technologically avantgarde approach, which includes Adam Afriyie MP’s presiding over the technology committee which ensures that British initiatives have the backing of the central government.

Mr. Afriyie told FinanceFeeds “One of this Conservative Government’s priorities has been to foster the growth of the financial technology sector within London’s unique financial ecosystem.

“Our regulators have been quick to adapt with programmes such as the Government Office for Science’s review into distributed ledgers, the creation of the Payment Systems Regulator to review Britain’s payments infrastructure, and the Financial Conduct Authority’s creation of the ‘Regulatory sandbox’ to create a safe space to pro-actively test innovative products” – Adam Afriyie, Conservative MP 

“The EU’s stifling approach to the digital market often means that legislation is out of date before it is agreed by the 28 member states, let alone enacted. The fact that the UK is quick to adapt and cautious of over regulation will ensure that FinTech will flourish in post-Brexit Britain and it could well be the case that the EU follows our approach in future”.

This is absolutely excellent for the giants of London, and will make their business efficiency shine through even more.

What about smaller brokers, though? Why are you in Cyprus or Malta? Everyone knows that those are aircraft carriers for dubious Middle Eastern or offshore firms to continue their affiliate lead churning and appear to be ESMA regulated but are really in many cases just weighted casinos with no intention of bringing their business to a regulated environment.

No way is huge leverage, bonuses and referral based business the means by which FX should be offered, so what if a top quality region of the world which is now free from the clutches of the European Commission, could offer your business a cheap, high quality way in to being a world class brokerage?

It can. I think Manchester, Liverpool, Sheffield and Leeds should be cultivated as FX industry centers.

They have access to Britain’s first class infrastructure which is fully set up for the financial sector, they have world class universities whose international economics and computer science graduates would love to stay in those cities rather than try to afford to move to London, and of course there is the FCA.

The FCA is not just a London regulator, it is a national regulator. Setting up your brokerage in the North of England would position your company as a top level firm, with the ability to offer a multi-asset solution to discerning customers, with a genuine free market economy which leads the world in transparency and financial services acumen.

The cost? The same as an office and staff in Limassol.

Last year may well have been the year to go the whole hog and invest $20 million plus in approaching North America, something I have been advocating for many years and was very glad to see IG Group act on – they will do very well.

This year is the year in which small to medium sized brokers who want to do well and have a quality business should look toward the rolling green hills of Yorkshire, the modern metropolis of Manchester, and the white stone West Coast beauty of Liverpool.

Friday: London’s thought leadership is growing

This Friday morning, before considering my last yeast-free meal until this time next year as the final Seder night for Passover loomed, I began to put the finishing touches together for the FinanceFeeds Professional Trading Thought Leadership Conference which will take place at The Ned in London on May 7.

There will be over 120 senior executives from across the world from America to Singapore, and from Sweden to South East Asia.

The Ned will be home to our industry changing conference on May 7

This is the first time that the FX industry’s top level executives will meet absolute leaders with a vested interest in the electronic trading industry who have performed global projects such as develop the Quantum computer system for the US government, or take IKEA’s brand to a global interactive audience.

It will position us within a new realm of high net worth institutional clients and will put attendees in front of London’s hedge fund managers and prop shops.

A whole new perspective will be gained, and will empower your business. Indeed a Blackrock executive said to me recently over a coffee in London “Andrew, you are trying to change a whole industry”. I took that as a compliment and a challenge.

Dow Jones will be there, I will be hosting and moderating, and we will meet the world’s movers and shakers.

This is THE place to be this year.

I am very much looking forward to welcoming you all and to fomenting the new movement at the top of this industry, and look forward to seeing you there!

Wishing you all a super week ahead!

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