London Summit 2018 is right around the corner and ahead of the event Finance Magnates sat down with some of the event’s speakers to get a sense of what’s in store. In this piece, we focus on cryptocurrency brokers, their ability to hedge properly, and what the future holds.
2018 has indeed had its fair share of surprises and shakeups, given the regulatory shift that has quickly created a new playing field for brokers. With some of the most stifling regulation to date, brokers have had to find new ways for growth in what has been a more competitive field.
John Murillo, Director of Dealing Division at B2Broker, details the state of the industry and how brokers can survive these trying times.
What is your position and what does your role entail?
Director of Dealing Division. I’ve been in the financial industry for the last 18+ years, started my career as a trader, moved into retail brokerage and currently in the financial services dealing with institutional clients.’
My main tasks consist of coordinating clients’ needs and services, creating offers and managing the whole process in order to meet clients’ expectations. As Director of Dealing Division, I face many requests on a daily basis as I am in charge of our Technical Support, Engineering, and Client Relationship teams overseeing six different trading platforms offered by the company to clients on a 24/7 basis in several languages.
What is the single most important market event or development in 2018 so far?
The most important development by far for 2018 remains more institutional participants joining the crypto space. Effectively, more participants turn into a deeper order book and tighter spreads. I see it as an evolution from illiquid markets to liquid markets. Regulation is evolving as well at a fast pace, so it’s only a matter of time until we see a full fledge asset class.
What’s the biggest challenge your clients or industry segment is facing, and what solution or approach do you support?
The biggest challenge is liquidity. Liquidity as such is a key component in trading operations. Most importantly, we have undertaken a proactive approach by aggregating liquidity using a BBO model, whereby every transaction gets order routed.
The system creates and distributes liquidity within its own ecosystem. Part of the company’s mission remains to ensure that every market participant has access to organic liquidity and the ability to offset risk if and when necessary.
Is the behavior of crypto traders different from traditional FX ones?
Crypto and FX traders share similarities. They are indeed seeking high returns; they have a risk appetite much greater than the average investor. Nevertheless, one unique characteristic that I find nowadays is the involvement of the younger generation.
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In the old days, FX was driven through a certain target audience and age group. In the crypto space, I believe the main difference lies in the fact that younger groups of society are getting involved at a very young age enabling brokers and other institutions to maintain their customers for a longer period of time i.e., the lifespan of that client has a tendency to be much longer than FX traders.
We’ve seen many people in this industry take an approach of holding onto their positions for a longer period of time. Statistically speaking, we see a lot of intraday trading along with long-term investments, so there is an opportunity to capture a much greater and diversified target audience within this space.
The crypto popularity remains and will continue to grow through time. It’s an asset class that is here to stay. Although there was some degree of skepticism in the early stages, this is now an industry that is gaining traction on a daily basis. I firmly believe that crypto is the future.
How can brokers hedge crypto positions effectively?
Brokers can hedge crypto positions through reputable liquidity providers. Such conditions enable brokers to offset risk in an effective manner. It is very important to understand the type of liquidity you are seeking in order to manage risk accordingly.
In this industry, liquidity remains one of the key points to address in order to have a successful operation. You must keep in mind that volatility in these markets remains pretty significant, thus selecting the right partner is a key component.
Where should brokers look at when seeking areas for growth?
I firmly believe brokers may seek for areas of growth through innovation and technology. Technology as such is a very complex operation that needs to be managed effectively by the relevant parties.
Brokers should focus on innovative ways to come to market by creating various marketing strategies and exploiting all the advantages and benefits they offer. A very important aspect of growth remains the ability to focus on executing your company’s strategy, your vision.
It is also important to listen to and effectively respond to customer needs in order to ensure a smooth and successful operation.
John Murillo will be speaking at the upcoming London Summit 2018, outlining the crypto survival kit that brokers can weather the storm with. Learn more and register here today!