In 2004, Swiss company Dukascopy Bank was established to offer direct access to the Swiss Foreign Exchange Marketplace, and to fulfill a market need for advanced technology within trading systems in the forex sector. The company offers a large pool of spot forex liquidity to its clients.
Drawing from an extensive network of banking partners, Dukascopy has directed its focus quite heavily on transparency and security in the forex industry.
The company maintains a twofold ethos:
The first of these tenets is in Dukascopy’s provision of equal trading rights whereby all clients have equal possibilities with which to provide and consume liquidity within the ECN Marketplace, and secondly a transparent pricing environment ensuring that all clients have access to the same liquidity. In essence, each and every client has the same data feed.
Dukascopy’s corporate hierarchy includes a four-member executive committee that oversees four divisions: IT and Operations; Marketing and Sales; Logistics and HR; and Finance and Risk Management.
After 7 years of experience, Luis Sanchez was appointed as Dukascopy’s Head of Institutional Sales, overseeing the sales operation European continent and the Americas, with a specific emphasis on white label partnerships. In this week’s interview with Forex Magnates, Luis Sanchez details the poignant parts of his career and achievements with Dukascopy so far.
Please give an insight into your own professional background, and detail how you arrived at Dukascopy Bank.
“I came to Geneva in 2005 from Lima, Peru. I was hired by Dukascopy Bank at the end of 2006 in order to target and develop the Spanish market with my solid background in sales, finance, and business development. When Dukascopy became a Swiss Bank I helped to managed solutions for institutional counterparties and became the head of white label partnerships for Europe and America.”
Please elaborate on some significant achievements and developments at Dukascopy Bank since your appointment.
“With our in-house knowledge, we were able to develop our own technology and platforms, placing us as one of the key players in the industry delivering a tailor-made product and liquidity to market participants.”
Having recently concentrated heavily on the Asia Pacific region with the opening of a Hong Kong office, and subsequently having investigated the possibility of opening in Malaysia, has the European side been put on the back-burner recently, especially with the lowering of minimum deposit requirements to $100? Was this part of a new direction aimed at retail clients?
“Initially, Dukascopy targeted institutional and high net worth clients. Some years ago, the strategic decision was taken to enlarge the client base by serving the retail market with the same advanced trading environment. Still today, all our customers benefit from the same conditions and data feed.”
“Dukascopy Europe is specifically dedicated to European and retail clients with account-opening as low as 100 USD. Dukascopy Bank manages all the technical developments and is focused on institutional business relationships such as white label partnerships.”
Let’s talk about the Hong Kong office. Is it a white label, or a rep office? What is its performance in terms of volume and compared to the rest of the company?
“In 2011 Dukascopy Bank decided to expand worldwide with a particular interest in Asia. We understand that international expansion is costly and that we cannot be present everywhere. That’s why we are opening representative offices in key hubs like Hong Kong, Kuala Lumpur, and Moscow.”
“The Asia Pacific region is the most dynamic in terms of account-opening and internet traffic. Our main principles of “equal trading rights” and “same transparent data feed” for every trader are a success in the region. Our Hong Kong office was a success less than six months after it started operations. The Asia region has grown more than 100% during the last 12 months.”
You were instrumental in forging the White Label partnership between Dukascopy and Integral Menkul Degerler recently. Please elaborate on that, and what it will bring to the company and how is Turkey an advantageous territory for you?
“Turkey is a fast evolving market with an increased tendency towards FX trading. At the same time, local regulation is strict which limits competition and chances to get a Turkish license. To have a local presence in this growing market through a local partner was definitely a priority.”
“After extensive research we decided to partner with Integral Menkul for many reasons. We believe this new partnership will benefit both companies, but moreover, it will benefit the residents of Turkey. In terms of volume, Turkey does around 60-80 yards a month while Integral has about 25% of it. This partnership reinforces the strategic development of Dukascopy Bank as a provider of white label solutions to worldwide banks and brokers.”
In terms of partnerships, do you think white label solutions from STP brokers are inflexible, causing the white label partner to become a pure clone of the white label provider?
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“Developing a complete solution and trading system from scratch is a huge investment and takes considerable time. It can take up to five years to master the know-how and the level of required investments which makes such a decision very complex and risky for a broker.”
“Brokers like focusing on running the business model and concentrating on their business development and financial results. The trading solution must adapt to the broker’s needs and not vice-versa. Opening multiple trading lines with different banks and liquidity providers via API is not a simple thing. Cost effectiveness is a critical factor for success, so brokers should concentrate on what they do best.”
Why would a newcomer to the market take a white label package instead of opting for a solution from a third party technology provider like xFSOL and having the ability to tailor it all to suit themselves and create their own business model?
“Going to a third party technology provider is a more complex solution but may have some benefits if the broker already has enough liquidity provider relationships.”
“Otherwise, newcomers may prefer to partner with an all-in-one solution, who provides them liquidity linked to technology, back office, front office support, a banking account for operations, and multiple trading platforms. Dukascopy offers a customized solution, with flexibility on risk and liquidity management, integrated along with front, middle, and back office.”
“The technology is in constant evolution. A look at our offer shows that it is one of the best in terms of cost, products, platforms, back office, service marketing, and support. Proof of this is our ever-growing list of prestigious white label partners such as: Alpari, FXDD, Integral Menkul, Halifax, VPE Bank, Moscow Industrial Bank, and others.”
What is the forecast for the year with Dukascopy’s European operations? Will it scale down, and are you experiencing less business nowadays?
“European volume is growing gradually along with the notoriety of Dukascopy Europe despite the bad economic situation and financial crisis. Clients of Dukascopy Europe can trade with the same conditions and on the same data feed as with the bank, therefore European clients have an interest to be served by a European entity and we expect further growth.”
Tell me about the provision from Dukascopy for white label partners – how much per million? What does the bridge cost and who provides it? What platforms are available? How does it compete with other ECN whitelabels such as AxiTrader (ASIC license, 10 USD per million, very APAC focused).
“As mentioned before, Dukascopy Bank offers complete tailor-made ready-to-use solutions. It goes from 3-4 weeks for a standard version, and goes up to 2-3 months for a customized one to be up and running. There are no implementation fees to be paid by our partners. There are no extra fees to be paid for maintenance, support, and marketing. We provide Jforex , Web, Iphone, Ipad, and Android platforms fully branded with customizable reports based on the brokers’ regulatory framework.”
“The solution comes with A-book, as well as the option for the broker to manage its own liquidity keeping the same execution standard. The broker pays an additional volume fee if he uses this last option In the case of A-book, the partner hedges itself with competitive spreads (about 0,3 pips on EUR/USD), all additional commissions/spreads are for the partner. It’s important to emphasize that all white label solution components and developments are done in-house by Dukascopy Bank.”
Will there be more exodus from North America as the NFA gets tough on regulations, and looks toward banning credit card deposits? Do you think the US will see less new small white label brokerages starting up?
“North America’s brokers nowadays are moving away from their retail licenses, such as Advanced Markets, Forex Club, GFT and recently FX Solutions. There are clearly higher barriers to enter the retail FX business in the USA. Trading conditions have been tightened and volumes are dropping. If the banning of credit cards is approved, it will further slowdown the industry. We believe that the US market will start another consolidation phase.”
How do you select white label partners? Do you qualify them; check if they have the knowledge, experience, and money to make the business succeed?
“Dukascopy Bank only accepts duly regulated and licensed banks and brokers, which ensures that they comply with high standards. Depending on the applicable local regulation, Dukascopy Bank further investigates about know-how of the business, its probability of success, as well as AML procedures. Dukascopy Bank cares about reputational risks and performs a due diligence on its partners.”
Tell me about liquidity provision – how do you tender for being one of the liquidity providers for a platform – for example Deltastock’s Delta Platform where Dukascopy is one of the providers along with LMAX, Citibank and Deltastock themselves. What do you look at when going in as a liquidity provider and how do you stay ahead of competitors such as LMAX?
“We offer our clients the ability to connect to us via FIX API. Any banks and brokers are welcome to hedge themselves with us. Our transparent and competitive pricing business model make our position strong in this area. We are constantly looking to offer better conditions. In the last months our spreads and commissions have decreased 27%.”
What is the focus for 2013? With volumes down all over Europe, and Switzerland being quite an insular base which traditionally is less international than New York, Tokyo or London, it is interesting to see how the company will move its business forward globally.
“Our technology is more and more popular; many brokers are looking for additional platform. We have seen an increase of about 50% last year. More and more clients are changing from their current trading platform (MT4, HotspotFXI, Currenex) to Jforex.”
“Our mobile trading is also one of our strong technology solutions, making a benchmark in the “trading on the go” Nevertheless, to ensure greater success, Dukascopy Bank is aiming to increase its partnership with local banks/brokers, to better serve traders.”