Taking control of London Capital Group after leading a £17.5M financing round into the broker and becoming its Executive Chairman earlier this month, Charles-Henri Sabet is moving quickly to put his fingerprints on the company’s business. Pending shareholder approval, LCG announced today a proposed software as a service agreement between them and Algoweb, of which is 50% owned by Sabet and his wife.
A retail trading platform providing straight through processing (STP), Algoweb was founded by Sabet and is headquartered in Morocco. The addition of Algoweb is slated to provide an additional trading platform which LCG would have to market to their existing customers as well as to promote to new ones. In LCG’s filing to shareholders, the firm stated that its “Independent Directors consider that there is an urgent need for LCG to install the technology offered by Algoweb in the Agreement (including the Smarttrade and Algoweb add-ins) in order to improve LCG’s execution capabilities.” They added, “The agreement offers access to international wholesale FX markets and presents an opportunity for the Company to significantly expand and diversify its customer base.”
According to terms of the service agreement, the deal would provide LCG with exclusivity of the Algoweb trading platform. However, the exclusive deal comes at a cost, which includes a £780,000 initial fee on execution of the agreement, and £300,000 payable in advance of each financial quarter, beginning October 1st, 2014. With a 36 month initial contract, total outlay for the first three years would reach £2.28M.
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Not being charged though are additional volume related fees. Comparing the agreement with comparable white label forex trading platforms, if LCG average daily volume flow were to reach one yard ($1B) for the duration of the 36 month period, it would calculate to a cost of slightly less than $5 paid per million dollars traded. The figure doesn’t take into account potential brokerage charges paid for STP. With LCG’s retail volumes being in retreat for multiple years, the agreement banks on a considerable rebound of customer trading activity and traders migrating towards the Algoweb platform.
Due to Sabet’s ownership in Algoweb, the service agreement is pending shareholder approval. Although, initial details of the proposed service agreement were first set forward in June when LCG issued a circular to shareholders about the £17.5M financing. As the financing has been approved by shareholders, it may relate that key owners in the company have already given the green light to back the Algoweb service deal.
In early trading, shares of London Capital Group (LCG.L) are lower by about 3% to 29.06p, but still well above their 21.00p price which was hit in July around the time shareholders approved the £17.5 financing.