During the last twenty years, the European fiscal landscape has changed beyond recognition. Whilst Western European economies remain in constant decline, are de-industrialized and hampered by the constant events surrounding the Eurozone financial crisis, some of the former Eastern Bloc nations have undergone a transformation which has led to the development of a stable economy.
Perhaps one of the best examples of this is Latvia, which has thus far staved off pressure from the European Union to join the troubled single-currency European Monetary Union, instead retaining its own sovereign unit, the Lats, and has leveraged its position as a significant trade hub between Germany, Russia and Scandinavia since the nation’s move from socialism to a free market economy.
The FX industry certainly has a place in Latvia, a fair proportion of which is provided by the nation’s banks, however the country is also well positioned to provide retail FX to an ever growing Eastern European and Russian client base. Forex4You is one particular example, and could be considered a company of particular interest at the moment following the launch of its copy trading product in the light of the recent MetaQuotes debacle.
In this week’s Forex Magnates Executive Interview, Max Lebedev, CEO of Forex4You details his perspective on what he considers to be a successful entry into this particular market.
In order to introduce yourself, please outline your professional career and background prior to establishing Forex4You.
Appointing me as CEO of Forex4You was a logical step after my work as COO, due to many years’ experience in management and business development. In today’s forex market, only the companies providing high-tech IT solutions can claim for a major share of the market. I have enough experience and knowledge of how to use the best technology and structure the work of the company to achieve maximum efficiency and provide competitive products.
What set of events led to the establishment of Forex4You, and what did you intend to achieve during the initial stages of the company’s existence? How did you go about achieving these objectives?
The history of Forex4You began in May 2007, with the launch of classic and micro-accounts on the MetaTrader 4 platform. Initially, the project was focused on Russian and Commonwealth of Independent States (CIS) markets. At that time, the popularity and availability of online trading and Forex was only kicking into gear.
Just like any startup, the most important goal in the very first stage was to attract customers. So, in 2008, we launched a unique affiliate program, which is by far considered one of the most attractive in the market.
In the fiercely competitive world of retail forex, to be able to enter the market and gain significant share is not an easy task. How does the company vie for its share of the market and what type of client does Forex4You attract?
Forex4You was originally aimed at a broad audience of self-trading retail forex customers, from beginners and micro accounts, like “Cent NDD” to professional services, like “Pro STP” for advanced traders. Recently, more and more customers show their interest in PAMM investment services and Share4You – the trade copying service.
A wide range of services can satisfy the needs of each client, while constantly improving service quality and the focus on satisfying the end customers’ needs resulted in attracting a large number of loyal customers, which increases every day.
Retail forex has undergone a considerable change over the last year or so. Spreads are very low, and acquisition costs are high. What is Forex4You’s method of remaining profitable under these market conditions, whilst ensuring that clients are still provided with low spread?
Indeed, the global services in the foreign exchange market are changing at a rapid speed and severe competition makes it more attractive to the end user. Of course, to stay competitive, our company provides some of the best conditions in the market.
Unique offerings in the market, combined with high internal efficiency of Forex4You, enable us to provide high-level services for all our customers, and for this year it is over 73,000 clients.
Following on from that, what is the key to success under these conditions in the retail market? If spreads are low, and acquisition costs high, once IBs and affiliates are paid their revenue share/CPA, is this a viable business, or do business models have to adapt away from the IB/affiliate/revenue share model used by many retail brokers?
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The company in any market must constantly reevaluate the situation and change its strategy, if required. In the foreign exchange market, reaction rate must be much higher, so as not to lose the market share. Increased business activity indicates that the strategy and tactics chosen by Forex4You are highly effective.
From which region is most of your volume?
Forex4You traditionally holds a high position in the Russian and CIS markets, so the turnover in this region makes at least 60% of the total turnover. We also seek to expand our presence in Asia and emerging markets.
Recently Forex4You launched a copy trading product. If this falls under the category of financial advice from a regulatory point of view, what is Forex4You’s position on this, and if it becomes regulated as financial advice, how will Forex4You provide a solution to this?
There are not that many social trading and copy-trading products in this particular market and only a few popular products. Though Share4You was launched in late April 2013, the service has already found its audience and becomes more popular with every passing day, due to its ease of use and a wide selection of leaders, whose trades can be copied.
One of the main targets of Share4you is the most objective reflection of trader performance, but the ability to subscribe to receive signals from a particular leader is solely up to the client. The decision to recognize social trade as financial advice should be taken by regulatory authorities, but in my opinion, it should be a balanced decision involving all market participants.
In your opinion, what is the likelihood of social trading platforms and copy trading solutions looking toward open platforms to work with in future, given the recent block imposed on four of the market’s largest providers of signals and copy trading by MetaQuotes subsequent to allegations of hacking of MT4 protocols?
Illegal use of reverse engineering and derived products contradicts legal principles and ethical standards. The recent public case to which you refer has shown that such tactics is dangerous and may harm the business. We do not support illegal ways of obtaining and using information about IT products, including MetaTrader.
Traditionally, financial products on the retail market don’t often use open source solutions and platforms. I believe that the situation with social trading won’t change greatly. On the other hand, new platforms appear several times a year and only a few of them can claim a more or less significant market share. Our Share4you platform is based on highly available and reliable architecture, rather than on potential vulnerabilities of run-of-the-mill software products.
Does Forex4You concentrate on multiple account (PAMM) traders? If so, how does the company conduct marketing in order to attract them? Are they paid an IB commission for bringing their client accounts to Forex4You, as well as being entitled to charge a profit share /success fee to their clients?
Since the launch of the PAMM service on Forex4You, the demand for it is increasing. This can be explained by advanced technical implementation of the solution and impressive choice of professional traders. The profit share model makes PAMM managers directly involved and interested in a positive trading result.
Is Russia a focus for Forex4You, and if so, what are the volumes? It is a largely unsaturated market. Please elaborate on your opinion of operating on the Russian market.
The trade volume in Russia and CIS countries is increasing steadily. In May 2013, the monthly volume in this region increased by 27% and amounted to USD 16 billion. This is not surprising, as Forex4You becomes more popular and we have 6 years’ experience in this market.
Do you consider BVI registration to be sufficient, or will Forex4You apply for further regulation? If so, which jurisdiction is preferable to apply for a license?
Forex4You is operating under regulation of BVI FSC license. For those new markets that we will enter, we will comply with local legislation requirements and regulation standards.
Full and detailed research with relation to the FX industry in Latvia is available within the Forex Magnates Eastern Europe Country Reports, available from the Research section by clicking here.