We take a detailed look at how London’s institutional FX market is evolving by speaking to ATFX Connect about its recent foray into the world’s financial capital
London has maintained its position at the very leading edge of the world’s institutional and interbank financial sector ever since the birth of capitalism over 400 years ago in what is now colloquially referred to as the Square Mile.
Its centuries-long tradition of global financial services and banking giants paved the way for global trade, and it is fair to say that almost all of the world’s commerce has, over the generations, been facilitated either by, or through London.
With the modernization of the global markets and banking structure came electronic trading, and London’s City and Canary Wharf financial powerhouses soon adopted the unfaltering stability of London’s institutions which morphed into plate lass towers with huge electronically traded asset bases, at Tier 1 level.
Therefore, the institutional electronic trading industry’s natural home is London, and it is not often that a new entrant arrives in the City. However, in September this year, ATFX, a retail FX brokerage with its origins in the Asia Pacific region, introduced its very own institutional trading desk in London, under the name of ATFX Connect.
Over the past two months, ATFX Connect has been strengthening its corporate structure, having recruited some highly esteemed senior FX industry executives with extensive knowledge of London’s institutional markets.
Today, FinanceFeeds spoke to Matt Porter, Head of Operations at ATFX Connect, in order to go into detail on how he views the future of the institutional FX industry, and on how ATFX Connect’s journey has been so far.
What was the ethos behind the establishment of the institutional division under the ATFX Connect brand?
Having built and delivered an exceptional retail product offering, and with the wealth of knowledge and experience that our staff have in the financial services industry, it has always been the intention of our shareholders and the management team to raise the profile of the company by stepping into the institutional space.
Having already established a presence in many of the regions in SouthEast Asia, as well as Europe and the Middle East. ATFX is now uniquely placed to partner with, and facilitate the growing demand from, High Net Worth Individuals, brokers, and more sophisticated clients in these locations, who are looking for a wider range of financial products and tools in order to diversify their investment risk.
With the launch of our new multi access platform ATFX CONNECT, paired with our flexible approach to clients and continued first class customer service, ATFX is confident in providing a liquidity solution that can compete against our peers whilst gaining a predominant market share within the institutional space.
The company has some very well recognized executives on its board, what is the future direction in terms of giving a high-quality trading environment to retail customers in today’s market of competition for market share and the need for diversification of product?
Here at ATFX, we are working to enhance our customer’s experience by installing new features to the MT4 trading platform through add-ons and personalised trading tools, which will provide further details to help our clients make more informed decisions when trading.
We have developed our own back office system and we are now in the process of re-launching a new version that will allow us to improve our Client Portal. Additionally, we are looking to provide new trading platforms and extra products, which will be paired with ultra-competitive spreads and fast execution.
We are looking forward to presenting clients with additional payment options, such as PayPal. To summarise, everything we do at ATFX is done with the customer in mind. We believe in providing a seamless and personalised experience for the client including the online application process, help with the trading platform, depositing, withdrawing, and assistance from the experienced relationship management team.
The extra features we are planning to include will help us to grab a good percentage of the market share.
What is your perspective on the need for retail FX brokerages to increase their range of asset classes away from the standard spot FX products available on MetaTrader 4, and given ATFX Connect’s liquidity provision to retail brokers, does the institutional service that you offer help brokers going down the Multi-Asset route?
As retail investors become more sophisticated through the many resources available to them, there has been an increase in demand for their brokers to offer a wider range of financial products in addition to spot FX, these include stock indices, commodities and alternative asset classes, to help them diversify their investment risk.
In time the ATFX Connect platform will offer its institutional clients access to all of these products and our CFD package will allow brokers to pass on the CFD pricing to their clients via an exchange data solution. By continuing to invest in our technology and with the ongoing development of our products ATFX is confident that it can partner with and meet the demands of it’s investor in the ever changing financial landscape.
How do you view the global regulatory changes with regard to leverage, and what can ATFX Connect’s broker clients gain from your expertise in today’s ever-changing retail FX market and how can brokers leverage your service given the ever-changing global regulations?
There has been mixed sentiment with regards to the changes around leverage requirements in the retail market, especially with the impact on the majority of individual clients who are less capitalised. This has led to consolidation within the market from many non bank liquidity providers, as their client base has been drastically reduced.
However, at ATFX we see the changes as a positive. Firstly, this forces brokers to attract a more sophisticated client base who hold a long term goal for investing. Secondly, brokers will have to address their acquisition and retention strategy which is something that ATFX is renowned for.
Finally, we believe that our healthy balance sheet will help ATFX attract many investors looking to transfer their business away from some of the smaller less capitalised institutions who have been forced to leave the market.
Do you think that manual trading will make a significant comeback among MetaTrader users, or do you consider the future to be fully automated via MAM accounts and Expert Advisers, especially among retail participants in important regions for retail FX such as South East Asia, an area in which ATFX has a vast amount of experience and what type of services can ATFX Connect give to brokerages that want to connect portfolio managers to their services?
Manual trading will always be around especially within retail traders. Although, lately there has been an increase in the popularity of algorithmic trading systems.
Working with algos requires a skill set that not every retail trader fulfills from understanding technical analysis, understanding the trading strategy, the parameters of the trading system, to programming skills or the use of a specific application to build one.
In addition, algo systems require manual adjustment of the parameters from time to time as market conditions change. There are algo systems for when the financial markets are ranging, trending, or for breakouts, etc. As the markets change, the algos will no longer perform as expected.
Now there is also the option to buy an expert advisor from the net. However, without the understanding and knowledge of working with algos, or the parameters and trading strategy, eventually the results will not be as expected.
Manual trading is still preferred by many traders with a semi- automatic algo that will aid the trader in making informed trading decisions, by providing signals of entry and exit points. Both manual and algo trading will always be there, as new traders will have started as a manual trader, before they acquired market market knowledge to move to algo trading.
MAM trading is a completely different topic. Retail traders that do not have enough market knowledge or time to learn or trade themselves, prefer finding a Money Manager that will trade on their behalf. These Money Managers tend to use a MAM (Multi-Account Manager) to add many trading accounts under one platform to facilitate managing a portfolio of clients and only executing once.
Through our new platform ATFX CONNECT we are able to offer a full suite of financial products allowing brokers to seamlessly pass this on to their portfolio managers, for example our CFD offering. Our current offering includes FX, precious metals, and CFD indices. In the future we will expand this to include alternative digital asset classes, additional commodities , and access to single stocks via CFDs.
With our low latency solution and technology we are able aggregate price feeds from multiple liquidity providers across 65 different currency pairs, we can then configure this to meet client’s needs whether it be a retail pool ( smaller ticket size), or a non bank pool only, or a mix or even early hours trading on a Sunday (can offer a price at 8PM LDN). In addition, we also have the ability to provide institutional liquidity from our own platform with OneZero bridge.
Talk us through ATFX Connect’s institutional product range for brokers, and how brokerages can benefit from partnering with ATFX in terms of liquidity, matching engine and top of book pricing and execution, and do you think that a retail FX broker is better served to provide liquidity to small to medium brokers than a Tier 1 bank due to the excessive capital the banks require, and their reluctance to extend counterparty credit to OTC firms?
ATFX CONNECT provides our clients with competitive spreads across 65 different currency pairs (including Gold + Silver) whilst offering access to over 20 liquidity providers, including tier 1 bank and non-bank liquidity. The technology enables us to tailor our liquidity in order to meet the requirements of each individual client by providing them with a unique bespoke solution.
In the past, many Tier 1 banks have reduced their customer base by cherry picking who they wished to partner with based on capital requirements, credit rating, AUM , balance sheet, and even due diligence costs involved when onboarding clients. This has led to many smaller financial institutions seeking a partner who can offer alternative liquidity solutions.
With the regulation stranglehold on banks and their continued decrease in risk appetite, FX retail brokers are well positioned to offer a more flexible, bespoke, and tailored service to the smaller/medium size brokers in the market for their liquidity needs.
We live in an age in which traders are very analytical. What tools do you think are vital for brokers to provide to today’s retail traders and what tools would ATFX Connect give them to be able to onboard and engage a good quality of client?
First and foremost, education is a key element that we offer to our retail clients in various ways, including free online seminars and webinars, premium account education packages, a free forex education centre, as well as full access to Trading Central (subject to account type).
This is so both existing and potential clients are fully aware of the risks involved when entering the financial markets, as well as building on confidence, and overall enhancing their trading experience, which is imperative to us and our mission statement.
Most retail clients tend to use technical analysis and charts which can be beneficial, however, many of these indicators and systems use historic price information to predict the future price of an asset or currency pair.
At ATFX Connect we believe that by offering our institutional clients analysis on macro economic events, market fundamentals, and technical analysis will enhance their trading education and provide a wider perspective on how the financial markets work and react. These publications can be found on ATFX Connect via www.investingcube.com
How do you envisage the expertise level of the client base of the future, considering that the next generation of traders is highly astute and understands electronic trading very well? How can they be engaged and get a long term, good product?
The demographic of the global investor has rapidly become more sophisticated over the last decade due to the availability of many financial products along with free educational resources available to the public and financial institutions.
In Asia there has been a large increase in the number of HNWs and fund managers looking to participate in global financial markets. Globally we have also seen a marked increase in multinational cross border activity both in terms of financing and business, this has also fuelled the demand from investors to educate themselves and diversify their investment risk across many different asset classes.
What does 2020 hold forATFX Connect and the institutional services that will be offered to brokers?
In 2020 ATFX will look to expand its institutional offering in the market by opening up offices in the UAE and GCC countries as well as Singapore, South America and more locations across South East Asia. We will also be paying close attention to the economic developments in China, not only on the ongoing trade talks with the United States but also to see if the government will relax the investment laws and open up the market to international investors.
These are the locations where we see the potential for growth as many of the developing countries and emerging markets have seen their economies grow rapidly in the last few years due to accelerated GDP, which has resulted in a more robust and stable economy for most. Financial institutions and HNW customers located in these regions now have a strong demand for financial products and efficient tools to diversify their investment risk whilst seeking lower transaction costs.
More importantly, we believe investors are now looking for a higher standard of regulation to safeguard their wealth and to manage their profiles, something that ATFX can offer via it’s multi access platform and through its regulation with the FCA in the UK.
We are also close to completing and securing our own Prime Broker in the international tier-one bank-level, which will allow us to service a wider and more sophisticated investor by giving our clients the option to trade with ATFX on a give-up basis rather than opening a margin account.
And as always, ATFX will continue its ongoing investment in its staff and technology by adding to the 100 IT experts that we currently employ in order to develop its infrastructure and technology. One focus will be our new trading platform and back office system to meet the needs and demands of our clients.
Legal: ATFX is a trading name of AT Global Markets Limited (ATGM, registration number 224226 IBC 2017). ATGM is an International Business Company in Saint Vincent and the Grenadines. Registered address is: The Financial Services Centre, Stoney Ground, Kingstown, St. Vincent & the Grenadines.