South Africa: The place for quality IB partnerships
“Diversified funds where FX and derivatives form a meaningful part of a client’s investment portfolio. We have been developing blended Micro Funds where clients get access to the skills of multiple managers through our platform and within one product” – Nick Sproule, Director, Blackstone Futures
Johannesburg, an absolutely magnificent international, multi-cultural city of 9 million people is the world’s largest man made forest, and is one of the 50 international Alpha Cities.
It is home to a wealth of resources, an enviable, highly luxurious lifestyle, quite simply magnificent surroundings and a world-renowned social lifestyle, and is also the most important business city in the entire continent of Africa.
Johannesburg may well be located in the middle of the southern tip of the African continent, but it combines 400 years of Western culture and education with ultra modern infrastructure, a very well educated population who are used to extremely high quality, and as a result is the opportunity center for a massive, resource-rich, unexploited continent which views Johannesburg as the epicenter of civilization for all of Africa.
Indeed, many brokerages now looking toward emulating Australia’s success are moving into South Africa, largely because it has similarly well organized regulations as those in Australia, a world class banking and financial infrastructure environment – Standard Bank, Mercantile Bank, Investec and Standard Chartered are among the world’s best Tier 1 institutions – and has access to an entire continent that looks upon South Africa as a bastion of business sensibility with English common law and culture, rather like the relationship between Australia and the APAC region on which its success has been built.
With this important region being very much at the center of FinanceFeeds remit to assist brokerages and their prospective and existing partners in refining their business and developing closer relationships, South Africa’s sophisticated and well organized network of introducing rokers and asset managers is a vital component in today’s retail FX industry.
On November 16, 2019, FinanceFeeds produced its second Professional Trading Thought Leadership Conference, held at the prestigious Bryanston Country Club in Sandton, which is Africa’s largest and most important financial district.
The event took the form of an all day conference, its format very similar to that of our London Thought Leadership Conference which took place in May this year, however the focus in South Africa has been on top level Introducing Brokers, FX hedge fund managers and proprietary traders which use brokerages to execute their trades.
Here in South Africa, the large companies have massive operational headquarters, with FSB regulation and are as important to their management as any office in Asia or Europe. The reason being that South Africa’s IB network is gigantic and very well organized, often operated by master IBs who represent the entire trading and investment portfolio of the smaller, satellite towns that they reside in, and have the total trust of their clients.
Whilst this is excellent, it means that the very same conflict is a concern for IBs. Attending the event were experienced professionals, all of whom have operated their business for a very long time and every one of them explained the same issue, that being the trust that the IB has to have in the broker, because one problem created by a broker would cause the IB to carry the can with his clients and the broker to be completely scot free.
Some examples of recent unpleasant circumstances were discussed, such as brokerages jettisoning IBs with recurring commissions so that they don’t have to pay the commission, leaving client bases transferred directly to the brokerage without actually remunerating the IB, which in effect is an unofficial theft of intellectual property, and also IBs having to manage the relationship between giving their client the best execution whilst being remunerated on a volume basis by b-book brokerages.
All of the IBs FinanceFeeds has spoken to during meetings in South Africa are very wary of b-book dealing desks, seeing them as unelected controllers of the IB’s business, and potential damagers of relationships between IB and end client in which only the broker gains and leaves the client and IB to conflict.
Therefore, there is huge opportunity in South Africa for agency brokerages with good quality execution and proper banking and custodian facilities to serve the quality IBs of South Africa well.
At the event, attendees were presented to by Scandinavian Capital Markets and Blackstone Futures, both very high quality companies with unique infrastructural models that actually spend time with the IBs on a personal level and have secure custodian services.
Following a day of discussions at the conference, FinanceFeeds spoke to Nick Sproule, Director of Johannesburg-based specialist FX, CFD and Futures brokerage, who explained
“Blackstone Futures was delighted to be part of the Finance Feeds IB Symposium, South Africa. If it was not the stunning setting of the Bryanston County Club that was going to entice the country’s leading IB’s and money managers to the event, then it was the speakers and panellists that were invited to the event. We were privileged to have Francis Hunt – The Market Sniper and Michael Buchbinder from Scandinavian Capital Markets in attendance.”
“Francis Hunt, known globally as “The Market Sniper” delivered a gripping talk on some of the macro trends that may play out and many of the fund managers in attendance would be wise to take note of his thoughts. There was lively debate amongst the audience and panellists as we covered a wide range of topics on the tricks brokers play, how to deliver an ethical service and the requirements of IB’s and investment managers.”
“We firmly believe that the market will evolve into a more regulated environment where brokers will need to get used to lower leverage and find alternative ways to remain relevant. There will be greater emphasis on brokers raising AUM and applying it to sensible managed services where clients can expect a return with a slight premium to long run equities” – Nick Sproule, Director, Blackstone Futures
“Diversified funds where FX and derivatives form a meaningful part of a client’s investment portfolio. Blackstone Futures have been developing blended Micro Funds where clients get access to the skills of multiple managers through our platform and within one product. A great way for clients to get exposure without having trade themselves” concluded Mr Sproule.
Speaking during panel discussions and individual keynote addresses to some of South Africa’s most experienced professional traders, IBs and FX portfolio managers were:
Francis Hunt, “The Market Sniper”. One of South Africa’s most successful traders will share his visions for better trading, and give insights into his ability to predict very important events.
Michael Buchbinder and Arif Alexander Ahmed, founders and Managing Partners, Scandinavian Capital Markets and inventors of the Valhalla Experience.
Nick Sproule, CEO and Co-Founder of Blackstone Futures, Johannesburg’s premier electronic trading and asset management brokerage for analytical and discerning traders.
Stephen Nefdt, Owner and CEO, Forex Wealth. One of South Africa’s longest established and most well respected Introducing Brokers.
Richard Goers, Senior Risk Analytics Consultant with international FX firms, and founder and owner of professional trading platform developer ManagedLeverage
Mark Strong, owner of Stronghold which is the Switzerland domiciled family office for the interests of the Strong family, and Head of Alternative Investment Fund Management at Optimum Management, an alternative Investment Fund based in Luxembourg focused on managing absolute return Global Macro/CTA strategies.