Although it may feel like years ago that the European Securities and Markets Authority (ESMA) implemented a wave of regulations which changed the face of the retail foreign exchange (forex) and contracts-for-difference (CFD) trading markets, these changes actually happened rather recently.
As you might be aware, the regulations saw the implementation of leverage restrictions for FX, CFDs, cryptocurrencies and more, and imposed massive prohibitions on binary options for retail investors.
Because of this, the FX industry within the European Union has changed and brokers have been feeling the bite of ESMA’s new regulations, with trading volumes dropping after the implementation of the new measures. In response, there have been both positive and negative reactions to the new regulations, with some market participants arguing that ESMA’s changes weren’t wanted.
However, one FX and CFD online trading provider, welcomed the changes – ArgusFX. Specifically, the company believes that these changes will only add value to financial firms in the industry and will eventually be implemented on a global scale.
To discuss this and more, Finance Magnates spoke with ArgusFX’s Managing Director, Harry Michaelides.
How does ArgusFX identify itself in the world of online trading?
In this vast arena of online trading, we don’t see ourselves as just another forex broker, but rather as a financial boutique, because besides FX we offer a wide range of other investment services, including asset/portfolio management services and a variety of financial products such as exchange listed futures, stocks, ETFs, fixed income securities, etc.
ESMA’s leverage restrictions came crashing down on the industry quite hard this past August and rocked the boat for many brokers. How did ArgusFX respond to these changes?
From the very beginning, our clients have mostly been professional/institutional clients due to our background in asset management. We did of course have some retail clients too but after ESMA’s restrictions the impact on our volume was very minimal because they were the minority.
Furthermore, our leverage rules and margin requirements were always stricter and we even have extra margin requirements depending on the currency pair, country exposure, central bank interventions, etc. We have always been on the conservative side of doing things.
How do you see the financial regulatory framework changing in Europe and worldwide?
Regarding how regulation has tightened in Europe, this is something I have been anticipating for a very long time — about three years now. As opposed to the way many brokers perceive tighter regulation, I see it from a positive point of view as something that can only add value to financial firms.
Tighter regulation means brokers will acquire substance through stricter procedures and ‘cleaner’ capital, and in turn protect their clients and achieve greater returns on investment by having more profitable clients. My prediction is that regulation will become even stricter in Europe and that in the long-term this will be better for all parties, investors and companies.
I also believe stricter regulation will eventually spread on a global scale too, as many of the brokers who were affected by ESMA’s restrictions are now focusing their efforts in offshore jurisdictions, where it is very difficult to keep checks and controls, therefore there will be restrictions on traditional banking which will in turn affect brokers who will have a hard time transferring money to clients.
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In your opinion, does the future lie in professional traders?
I cannot say it lies in one camp or another, as this entirely depends on the broker model each business has. There will always be potential and a market for both. ArgusFX for example is better equipped to serve professional clients. It all depends on the company’s model and approach and it is hard to imagine some game-changer that will completely tip the scales in favour of one type of trader.
Blockchain technology has taken the financial industry by storm and the majority of brokers are rushing to place cryptocurrencies at the helm of their offering, but you seem to be moving back to more traditional investments. Could you elaborate further?
Cryptocurrencies have definitely entered our lives full force, albeit with their fair share of complexities. Bitcoins for example are near impossible to cash out, as there are very few ATMs in the world for such use.
On the other hand, regulation and fees by banks lead people to seek alternative solutions other than bank transfers, and Bitcoin transactions are a perfect means to avoid this. So for those who have no interest in cashing out their cryptocurrency, but are interested in its other uses such as the ability to pay certain expenses and fees to companies who accept it, this is huge.
From that point of view, the popularity of cryptocurrencies is certainly due to rise even more and ArgusFX will continue to offer them in addition to our other products. The cryptocurrencies we offer are futures listed on CME exchange, so this offers the comfort and reassurance of trading with a clearing house, therefore clients know their money is secure.
Why is it so important to offer more than just forex in today’s industry?
Investment firms should never offer one thing only and FX has never been our primary or sole focus. With so many asset classes opening up myriad opportunities, why would one focus 100 percent on FX? Look at natural gas for example, which rose 50 percent in the past two months. An ETF with exposure to natural gas could yield a very good return.
There is so much one can do to diversify their portfolio and boost its performance, so why wouldn’t we offer them the opportunity to do so? Diversification is the A to Z of investments; without it, portfolios cannot be profitable long-term but will simply go from sky high to rock bottom. Therefore it is my opinion that a variety of products must always be offered in tandem.
To what extent has your background in asset management defined your vision for ArgusFX?
When you come from a background in asset management and it is your area of expertise, it defines your understanding and vision of this whole industry. It’s what we’ve always been excellent at doing and it’s what sets us apart from the rest, so it does define our vision for ArgusFX to a very large extent.
Since we last spoke, ArgusFX launched its own regulated investment platform. Could you talk to us a little about this platform?
The Argonaut is a regulated investment platform through which we are trying to prove that when strategies are managed correctly they can perform optimally and have great returns. This means that high leverage should not be used and the approach should be very conservative; you must have legal certifications in the pool of assets you are using, etc.
By making these strategies available to investors who are interested and verifying the returns of these managed accounts we are showing investors that there is more they can do to access the financial markets than just trading, if they cannot or do not want to trade themselves for whatever reason. With managed accounts investors can have good (and reasonable) returns.
When you attempt to have reasonable returns and you know the risks you must and should take to have those returns then there is plenty you can do and many strategies you can invest in. This is the foundation upon which the Argonaut was built and functions.