Forex Magnates reached out to Juan Colón, the Co-Founder and CEO of Darwinex, a P2P Asset Manager, to discuss the new launch of DARWINs and the firm’s innovative new approach to forex trading. His full length interview can be read below.
1. What is the genesis of Darwinex and what it is that makes you guys unique compared to other entities in the industry?
The reason we are here is that we know that the best independent traders out there are seriously good, and there is a big opportunity to bring their talent to investors for mutual benefit. As such, we refer to ourselves as a Peer To Peer (P2P) Asset Manager.
We are launching a platform that transforms trading strategies into DARWINs (Dynamic and Asset Risk-Weighted Investment), a new asset class that investors can purchase. Becoming a broker gave us the flexibility to offer the best execution, control our product end-to-end and protect the intellectual property of the strategies. Without this we could not guarantee that no-one could front-run their strategies or copy them without paying them for profits.
Darwinex describes our bet for evolution, and makes us accessible to a much broader audience: DARWINs are accessible to a much larger population than today’s forex traders. Buying DARWINs requires no understanding of concepts like “leverage” and “stop losses”. Copy trading is proven in the sense that a lot of traders like it, but it´s hardly a thing for non-traders – if you don´t know about trading copy-trading often ends up badly.
Its very basic, lets assume you are the world’s best trader: your most precious asset is the knowledge of what you’re trading. If you reveal it, anyone is in a position to replicate your profits without giving you a share in it.
Short of paying traders for success, brokers offering copy-trading resort to marking up follower spread/commissionsto kick part of this mark-up to lead-traders. This creates a conflict of interest between copiers – who want profits – and leaders, who get paid on commissions.
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Unsurprisingly, copy-trading Leaderboards end up populated by high risk, high volume strategies wherecommissions, rather than investor long term profits are the priority.
Further, smart copiers need not pay mark-up commissions: knowing the trade-leader’s trade, they may place it on a separate brokerage account without mark-up. This set-up pays the trade leader vulnerable to receiving neither success fee nor commission kick-back.
Darwinex was created by a trade-leader who just didn’t feel like giving away valuable intellectual property for nothing.
At Darwinex, strategies share in our revenues. As an FCA (UK) regulated asset manager holding a 100% STP broker license, we legally collect both success fees and commissions from investors. Unlike other services, the ONLY driver of trader revenues is investable behavior and profits – not commissions generated. Further, the live composition of a DARWIN (the wrapper around the underlying strategy) is never revealed to investors to protect the trader’s intellectual property.
Protecting intellectual property won’t lure good traders away, which results in aligned incentives for both trader and investor good. Investors remain in control at all times: they know the live equity value at all times, and they enjoy immediate liquidity to their profits, which is ultimately their concern.
3. Has there been a substantial call for new traders or have you seen participation swell as a result of this approach?
We are signing particularly skilled traders like cookies and getting positive reviews by those who experience our execution. When you are new it’s natural for people to initially distrust you, but the fact that we’re backed by heavy-weights in the financial industry, FCA regulated and been around with Tradeslide for a couple of years helps.
Many test us with a demo and small accounts before upgrading to real accounts, and we expect this to even accelerate in the coming months.