Having a multitude of brands and separate business units aimed at attracting business from specific segments within the FX industry is certainly one way of offering a targeted service. AFX Capital’s methodology reflects that line of thinking, with its retail arm being, along with a wealth of others, a Cypriot entity regulated by CySEC, as well as a further CONSOB regulated branch in Italy, whilst its newly established institutional business unit is located amidst London’s financial district, with FCA regulatory oversight.
In the same vein, AFX Capital also has a seperate CFD business, under the designation SuperTradingOnline, and an in-house, institutional technology and software provider, Market Technologies.
This week’s Forex Magnates Executive Interview investigates the importance of focusing on business needs within each business unit, as Rachel Clark, COO of AFX Markets defines the company’s foray into the institutional segment, elaborates on technology provision, and the future of the retail FX market.
Please elaborate on your career background, and what led you to your position at AFX Capital Markets?
I started my career at Cantor’s which introduced me to the broking world and then moved for a brief time into investment banking working at Deutsche Bank and BGB before returning to where I was suited best. I then spent 7 years working for IG in various functions giving me a wide overview on the retail FX and CFD market.
I started out as a sales trader and then moved into Business Development for IG’s European expansion after MiFID in 2007 where I was based in Madrid to set up the Spanish office and later a Portuguese desk and then I moved to Stockholm in 2009 to set up the Swedish office. After 18 months I relocated back to London to the marketing department to grow brand and category awareness and was also responsible for the global sponsorship of Team Sky procycling.
I was approached by AFX Capital to structure the sales and marketing of the group and put in place the necessary policies and procedures required for a company in this industry. I thought it was an exciting opportunity to join a relatively new start up and would allow me to take full responsibility of the skills that I had built up over the previous years.
Upon assuming your position as COO at AFX Capital Markets what did you set out to achieve initially and how did you go about it?
There were already quite a few Cypriot brokers in the market place so I wanted to ensure we had a competitive edge.
We worked on offering a more comprehensive FX and CFD product range on the MT4 platform than other FX providers, (offering equities, interest rates, bonds, commodities and indices), introduced Sostituo d’Imposta, a service in Italy where we calculate and pay the capital gains tax on behalf of clients, a full educational offering for clients including videos, webinars and guides and we looked at offering an alternative platform with L2 -cTrader.
We also wanted to diversify our offering to make us stand out and help us survive any changes that could have an impact on the industry such as the FTT, EMIR and other regulatory changes. We decided to compliment our services by offering portfolio management accounts, have a better institutional offering and provide some technology solutions.
AFX Capital began as a retail broker, and is now beginning to expand its service toward the institutional side. Will this be offered from Cyprus, or will the firm utilize its London office as a base for the institutional business and Cyprus for retail FX?
AFX Capital Markets Ltd has recently split up the business into 3 different divisions: SuperTradingOnline (STO), Market Technologies and Quantic. STO is the trading name which focuses on the retail side; Market Technologies is the new entity created to develop the institutional business for banks and hedge funds; and Quantic is our division aimed to promote Portfolio Management Services. All three are regulated in Cyprus but STO UK is regulated in London under the FCA for retail, institutional and HNW clients that want the FCA protection.
It is interesting that AFX Capital has a focus on portfolio management. Which MAM is used? Do you think that the regulators may require all registered portfolio managers to be regulated as financial advisers? If so, how will AFX Capital operate its portfolio management side of the business in accordance with this, as very few MAM traders are registered as financial advisers and doing such exams and becoming registered (if the regulator takes this route) will take time.
Quantic under AFX Capital Markets Ltd is fully authorized by CySEC to offer Portfolio Management Solutions to our clients. We rely on state of the art MAM technology and provide several trading strategies which suit client’s needs to diversify the global exposure of their portfolio. We expect that the regulatory framework will become more stringent and complex for the MAM traders in the future and when regulations change then we will of course adapt to these changes where necessary.
Please elaborate in detail on AFX Capital’s recently launched institutional offering.
We have just launched Market Technologies whose primary business is to provide liquidity through an aggregator to institutional players such as leading banks, hedge funds, sovereign wealth funds etc. We also develop back, middle and front office solutions mixing cutting edge technology with operational efficiency.
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AFX Markets Ltd is regulated by the FCA and has an office in London allowing clients to retail trade under the FCA assurance with SuperTradingOnline UK. Please explain SuperTradingOnline?
In spring 2013 we rebranded our retail offering as SuperTradingOnline as we wanted it to be clearly targeted at retail clients. The idea is that retail clients can come to us to find a full array of platforms, products and educational services that suit both beginners and advanced traders. SuperTradingOnline UK allows clients to open an account under FCA regulation.
What is your perspective on the future of open platforms as opposed to MetaTrader 4 in the retail sector. Do you think there will be a switch toward cTrader and tradable, along with fully customizable software add-ons as traders become increasingly knowledgable, or do you think that MetaQuotes will continue to dominate due to its fully-integrated nature and the familiarity among traders?
MT4 is the industry leading platform and has been for a long time. People feel familiar with it and trust it which is essential for the retail market. Its fully integrated nature and comprehensive availability of EAs is certainly attractive. However, in recent months we have seen the development of cTrader and tradable amongst others which are certainly having a competitive impact in this technology space. We launched cTrader a few months ago as an alternative solution for our clients wanting to see FX market depth and in the coming days we will be able to offer gold and silver to these clients as well.
What is your view on the future of Cyprus as a hub for trading firms. The banking crisis and the substantial haircuts applied to bank accounts seems to have gone quiet. Do you think it will continue as an FX hub to Europe, or has the credibility been damaged and AFX will look toward centralizing its operations in London instead?
Cyprus remains an important place in the retail FX market. Since the crisis last March in Cyprus the regulatory framework has tightened and we are still seeing brokers everyday fighting for more market share. Companies need to be able to adapt quickly to market and regulatory changes in order to remain ahead of the competition. AFX Capital has therefore given all of its clients the opportunity to open an account under CySEC or FCA regulation.
As more traders require the STP model of trade execution, whereby direct market access is offered without a dealing room, spreads are now low. How is business still viable with such low spreads and reliance on partnering with IBs? Can a profit still be turned if spread is 0.3 pips?
In order to remain competitive a broker must ensure that they offer the best possible execution and service for the clients. Not all clients are interested in the tightest spread there are other factors that clients look for in trading such as leverage, out of hours trading, access to exotic products, trading platforms, stops, excellent customer service etc. With regards to IBs if we reduce the spreads then the business model needs to adapt accordingly. Commissions can be added for the extra services that the clients receive.
Who is AFX Capital’s technology partner? Does the firm use a fully white-labeled solution, and which firm provides the liquidity feeds?
AFX Capital builds its own technology in house and is always investing heavily in this part of the business. We use several liquidity providers through an aggregator for both FX and CFD markets.
Which regions provided the highest level of trading volume for AFX?
Our clients are based globally but we have seen the best returns in Italy, Russia and the MENA region. AFX Capital has offices in London, Milan and Dubai as well as Cyprus. The physical presence in these areas, as well as targeted products for these clients, has helped us to grow business in these markets.
What is the next step for AFX in terms of new markets and new products? Does the institutional offering involve partnership with a larger institutional firm, and what will AFX offer? Will it be a technological provision to brokers?
At the start of the year we launched our Chinese website and have seen significant demand from China ever since. Our next step, therefore, will be to open an office in Shanghai in the near future in order to have a physical presence over there. Our institutional and technology solution offering is just being launched now so we will continue to invest and grow this area of the business and adapt to new changes as they arise.
How will AFX differentiate itself from the other 136 entities on the retail side in Cyprus? Retail FX is becoming so competitive now therefore a USP is often required to stay ahead.
As I said above we have been working very hard on this differentiation over the last year splitting the business into 3 different areas: STO for the pure retail clients, Market Technologies for the Institutional and Quantic for the portfolio management. We are also working on USPs in each area for example on the retail side more CFDs on the MT4, other platform choices, Sostituto d’Imposta (for Italian clients) etc. This way we can give each client the tailored product he requires.
Let us know AFX Capital’s plans for the rest of the year.
AFX Capital has developed a wider offering for every division of the business and we will continue to develop and improve this. We are also working on a new project which involves the next generation of community trading so keep an eye out for it!