OANDA has implemented a new partners-based sales strategy as the slowdown in FX markets continues. Forex Magnates reports that leading currency broker dealer, OANDA, has joined the vast list of providers on CashBackForex’s approved brokers.
The technology driven firm has become the thirty sixth broker to be listed on CashBackForex’s (CBF) website, providing traders with rebates every time they place a transaction.
OANDA joins CBF’s main site directed at non-US traders, OANDA’s European and Australian entities will be offered to traders. CBF’s portal gives traders a rebate amount based on the spreads and commission the broker charges.
CBF, a leading intermediary firm that provides traders with money-back opportunities for trading with brokers, revolutionised the retail space in 2009-2010 when its unique business model took off, the firm’s latest report shows the number of traders using its service on its website at 44,895 users. CBF receives an amount of rebate from the broker and consequently shares this with the end user, every time a trade is placed.
OANDA and Introducers
OANDA has constantly bragged about its commitment to offer the best price to its traders, and by working with IBs it felt that end users will suffer, so why the change? By adding IBs and affiliates, the firm will either need to cut its costs or the IB will mark-up spreads.
In the past, OANDA has been adamant that the IB market isn’t for them, OANDA’s former Head of Marketing, Paul Jeszenszky, commented during an interview with Forex Magnates in 2010, sayng: “The topic of Introducing Brokers (IBs) is always interesting. I won’t dive into this too much, but in our history at OANDA, we have seen very few IBs adding real value to clients. Sure, a small minority might add value, but most IBs just cost clients money for no good reason.
Forex dealers pass on the cost of paying IBs by marking up spreads for the clients recruited by the IBs. That is a lot easier to do when you don’t offer the same rates to everyone on your platform and you don’t publish the spreads publicly on your website. So this is not an area of business I see OANDA entering into. Adding weight to this argument, regulators are starting to agree there are some dubious practices around the use of IBs as they are clamping down.”
Changing Operating Environment
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The ever-evolving retail FX market has seen dramatic changes since the post-recession peak years of 2008. Regulatory changes across major markets including the US in 2010 signalled the demise of the US market. With capital adequacy requirements sky high and leverage rules in tact, a number of FX traders who were using US-based brokers drifted away.
OANDA, a strong player in the US market, was the largest broker in 2010, according to data supplied to the financial watchdog the broker had over 49,500 trading accounts. However, times have changed and the most recent US profitability report shows OANDA having 20,320 accounts.
OANDA discussed the potential of a change in its strategy last year, as reported by Forex Magnates. A representative of the firm explained to Forex Magnates that the firm was assessing the suitability of intermediaries.
Baiju Devani, Director, Corporate Development at OANDA, explained to Forex Magnates: “As you have already noted, OANDA has been considering a partnership program for the past few months. We have held discussions with several Introducing Brokers and, at this time, have entered into partnerships with a limited number of IBs.”
Drew Izzo, the firm’s current CMO, reaffirmed Mr. Devani’s point during an interview: “Historically OANDA hasn’t been using introducing brokers, however that is about to change. We are in the process of evaluating partnerships, we will be incredibly selective in who we are partnering with and the costs will be fully transparent to our clients.”
As a result, OANDA is collaborating with CBF as it aims to enhance its position in the online trading space. Vatsa Narasimha,
Executive Vice President and Chief Strategy Officer, OANDA Corporation, commented about the partnership in a statement to Forex Magnates: “Given the recent consolidation in the US market, we need to ensure customers are making informed decisions about their brokers and reputable IBs like CashBackForex are a great means of doing so.
Much like with our partner program, OANDA will only consider IBs who are regulated and reputable, and uphold the same customer-centric, transparent business practises.”
Although OANDA has altered its sales approach to include intermediaries, its ethos of ‘mark-ups’ stays the same, under the current terms of the agreement with CBF the broker will give traders $1.5 per lot traded (on a round turn basis – full trade). OANDA offers competitive spreads to traders, on its website it shows a real-time feed linked to its platform, at the time of writing the spread on EUR USD was 1.1 pips, the same spread offered to CBF clients.
OANDA’s move away from the traditional ‘direct acquisition’ to affiliate and partner driven model will be a cause for concern for brokers who rely heavily on intermediaries for marketing and business development. The multi-asset, multi-region broker has a strong reputation among retail investors and has positioned itself as a fair broker.