2020 has been a year of change, with the trading industry being no exception. Finance Magnates spoke with Stavros Lambouris, CEO at HYCM International for his perspective on the pandemic as it affects the company and broader industry.
In your view, how has the coronavirus pandemic affected the global economy in general and the online trading industry specifically?
Your readers will by now, be very aware of the multiple dislocations that COVID-19 has caused in the global economy.
From disruptions to both supply and demand as economies lockdown and reopen at different times using different measures to entire sectors, such as travel and tourism, restaurants, and brick-and-mortar retail outfits having to significantly curb their operations.
Our industry has in many ways been a product of the online revolution. We have been experiencing growth that has followed two important trends; the widespread adoption of online technologies including mobile; and increased financial literacy among the general public leading to a growing interest in participating in markets.
Both trends have been accelerating over the past two decades and have tended to surge when the global economy has faced obstacles that have led to increased volatility.
We saw it in the early 2000s; we saw it again after 2008, and we are seeing it once again in this post-COVID world.
Is this recent crisis different from those of the past, and how do you think the online trading industry will face these challenges?
Many traders view economic crises purely in terms of volatility and the opportunities it offers. It’s natural for them to compare this most recent bout of volatility to other historical events such as the 2008 crisis.
However, I do think that this time is different. Firstly, this is primarily a medical crisis that will need to be resolved by a medical solution.
This will either be a vaccine or a suitable treatment that hugely reduces the COVID-19 mortality rate. One of the ongoing questions is whether or not companies will be able to survive the downturn induced by COVID-19 shutdowns.
Despite the government fiscal stimulus and support from central banks around the world, many companies will be sorely tested by recent events.
The extent of the stress on economies is still not fully known and remains an ongoing area of uncertainty. Secondly, these recent events are actually changing how we do business, how we communicate and even how we spend our leisure time.
There has been a strong acceleration in the trend to digitalise. This rapid acceleration of digitalisation across many sectors is bound to have long-lasting effects on the culture at large.
Many of these effects are still being played out, and the question remains as to which businesses emerge from this crisis the strongest.
The online nature of our business has made it easier for us to transition to this new state of affairs than it has for companies in many other sectors.
HYCM has been a case study for this change. As a truly global firm with a physical presence in the UK, Europe, the Middle East and Asia, our teams are already accustomed to working efficiently and coordinating at a distance, so it has been a relatively smooth transition to allow individual employees within our many offices to be productive while safely observing social distancing guidelines.
Our Chief Currency Analyst, Giles Coghlan, conducts a free FX Week Ahead webinar and Level Up practical workshop every week, so our clients can continue improving their trading skills as long as they have an internet connection.
As far as our clients go, I believe COVID-19 has accelerated a trend that was already well underway before any of us even heard of the coronavirus.
This trend is definitely towards younger traders, specifically from the millennial generation, who are seeking to learn about and gain access to markets.
They bring with them their own unique sets of demands that differ from previous generations. For instance, mobile is paramount to these new traders as well as UX quality.
They are also interested in a broader array of asset classes including cryptocurrencies, whereas earlier traders were satisfied with trading single asset classes.
This is one of the reasons we have recently expanded our range of cryptocurrency CFDs.
How have traders adjusted to the upheaval in markets? Are new trading strategies required for this new environment, and are traders turning away from certain assets?
I don’t think that trading strategies themselves typically change much from cycle to cycle. You must keep in mind that how traders behave is informed by the entire history of markets – every bubble and every bust.
The mentality may switch from aggressive to defensive at different times.
For instance, there has been a surge of interest in gold and bitcoin, but it’s not a complete shift in attention because EURUSD remains one of the most popular instruments we offer, as well as US stock indices etc.
What’s changing is that in every subsequent cycle retail traders have more assets available to them, news travels faster, and financial knowledge becomes increasingly accessible.
Today’s HYCM trader has access to a wide variety of assets, from the more traditional FX, commodities, stocks, and indices to an array of exciting new digital currencies and ETFs.
They also have more tools at their disposal to build positions and develop portfolios than previous generations of retail traders.
Also, it’s important to note that the retail trader came of age in a big way during this crisis. By many measures, the market action we witnessed after the crash earlier this year, especially in US equities, was largely a retail-led phenomenon.
This is quite an impressive development. As more institutional investors have retreated to passive investing over the past decade or so, retail traders have found themselves on the front line, so to speak.
And judging by the performance of US equities since March, many of them have found themselves on the right side of the trade, which is very encouraging.
Certainly, it is more important than ever that retail traders find a reliable broker. HYCM has a reputation as a solid and secure broker with over 40 years of operating experience as part of the Henyep Capital Markets Group.
HYCM is headquartered in the UK and is a multi-regulated broker, licensed in several jurisdictions including the FCA, CySEC, and DFSA.
How is HYCM positioning itself in this new normal, and what’s your outlook for life after COVID for the industry, as well as society in general?
For our part, HYCM has spent over 4 decades in the business and our track record of continued growth despite market turmoil has stood us in good stead.
We’re regarded as a trusted broker with a pedigree of resilience, whether it is to the GFC more than a decade ago, the SNB black swan five years ago, or this latest challenge with COVID-19.
For this reason, we attract a wide variety of traders, from large investors and institutional clients to a new generation of retail investors who want to learn the craft in a regulated environment with a brokerage that has all the tools and experience to help them on their journey.
If we continue catering to all varieties of traders and keep our finger on the pulse of markets and traders’ needs, I think the industry will only keep growing from here.
As far as the broader outlook is concerned, I am generally optimistic. We will get through this trying time, just as we have done countless times in the past.
There is indeed a new normal that has taken hold this year, and it could be set to continue for years to come, but ultimately COVID-19 will be a distant memory for future generations just like the 1968 Flu Pandemic, which most people had never heard of before this year.
ETFs are available only under HYCM Ltd (CIMA) and HYCM Limited (SVG).
Cryptocurrencies are not available under HYCM (Europe) Ltd.
HYCM is the global brand name of Henyep Capital Markets (UK) Limited, HYCM (Europe) Ltd, Henyep Capital Markets (DIFC) Ltd and HYCM Ltd, all individual entities under Henyep Capital Markets Group, a global corporation founded in 1977, operating in Asia, Europe, and the Middle East.
High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.