Exclusive Interview: Sophie Squillacioti, Alpha Capital on the Chinese Forex Market

Alpha Capital Markets is an Institutional broker specializing in B2B services for retail brokers. Sophie Squillacioti recently joined the company as Managing Director for Asia-Pacific (APAC). She is tasked with developing and growing the group’s business in the APAC region, including its newly launched Shanghai office.

Sophie is an APAC veteran, having spent over a decade developing and managing CFDs and FX capabilities in China for IFX Markets and City Index.

In a bid to better understand the conducting of Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term business in the APAC region, Finance Magnates spoke with Sophie to hear her insights, specifically regarding the Chinese forex market, the advantages of working there and any current and future trends to look out for.

What are the main advantages that you have found with working in the Chinese market?

Above all, the huge volumes of people ensure a steady flow of business at all times. It is very exciting to work in an environment where the nature of business is high paced and the response by clients and IBs is so immense.

The evolving nature of the business makes for a very interesting environment to operate in. Over the last 11 years, I have seen this market grow from 2-3 players on the ground to over 500 as we speak. Whilst this adds a highly competitive environment, it forces brokers to constantly reinvent their offerings with increased functionality.

I have found that the demand created by Chinese business is a big driver behind many companies.

In your experience, what are the most important localization issues for international firms in China?

You can master the language and the geography but very few people take the time to master the culture. There is a definite way of doing things here that you can't account for until you actually come to China and experience it for yourself.

I know a number of people who have come out here with the language skills under their belt but totally failed to adjust to the culture and have gone on to fail. If you don’t put in the time you will not understand the way in which business is undertaken.

Why is there a need for an office on the mainland if business can be handled by an office in Hong Kong?

Again, going back to culture, the people here want to see some commitment from the people they work with. Over the past ten years there have been a lot of brokers who have entered the market. The ones who don't show the level of respect or commitment to their clients have failed.

Think about it this way...would you put your money in a financial institution that didn't have a branch in your city, let alone your country? The Chinese market really requires a company’s commitment - not just financially but locally.

Many firms try to force Western approaches on the market here but that simply does not work. This is China and you have to accept that business is done differently compared with the way it is done back home and in order to succeed, you need to acknowledge that.

People say that in China introducing brokers and local affiliates hold all the power as clients follow them blindly. How do you navigate such an environment?

The key with IB relationships is monitoring. You have to make sure that both partners have their hands where everyone can see them. At Alpha we constantly monitor for IB’s who are simply trying to take advantage of low Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term times in the market, arbitraging of the spreads, ways to simply fatten out their rebate, churning of accounts and so on.

It goes without saying that not all IBs, or clients for that matter, have the best intentions when they trade. In a market like China it is necessary to monitor the business. If you don’t, the business, and indeed the industry overall, will suffer.

Generally speaking, clients only work with IBs who have a good rapport with the underlying broker. It is also up to the IB to maintain a tight relationship with us.

How do you avoid conflicts of interest?

That comes down to 11 years of experience, cutting deals that work for both parties and making sure that the deals never steer too far towards either camp.

You have to keep your mind on the big picture and keep some sort of consistency and structure in place. Otherwise, you may end up sinking the whole enterprise with a single deal.

Finally, what recent trends have you noticed emerging in the Chinese market that most people are still not aware of?

There are a lot of brokers in this market. Most of them are just a flashy website with a borrowed platform. The reality is that not too many of the 500+ brokers are worth the effort to work with.

These, so called, "black platforms" are a constant nuisance to the core of serious brokers working with Chinese clients. The hope is that as more and more clients get more sophisticated, they will stay well away from these black platforms.