Redefining speculation; where are we really going, regulatory speaking?

Redefining speculation; where are we really going, regulatory speaking?

It’s indeed gloomy to see the “speculative” ecosystem collapse on itself, while it undergoes dramatic changes in its regulatory regime. Looking back to 2004 when MiFID I was created to ensure a harmonised, more contextual framework and as such industry participants saluting its posh, arrogant posture, one has to wonder “Where are we really going, regulatory speaking?”

Following last Friday’s ESMA statement in relation to CFD’s and after the diverse opinions in comments we received on our recent article about MiFID II, it is true that we are deviating more and more from what the word speculation means in its core. Google (and who can argue with Google) says that speculation is “the forming of a theory without firm evidence” and as such, “investment in stocks, property, etc. in the hope of gain but with the risk of loss.”

Speculation is part of our everyday life, whether you’re buying groceries (recent example of salmonella found in baby food products), a TV, kitchen appliances, a laptop, accepting a new job, riding a motorcycle, driving a car or even climbing a tree to show off to your girlfriend (not sure to whom this applies for, thought it would make a valid point). Although you might have some information on what you’re about to do, you’re still speculating on whether the outcome will be beneficial for you or not – my wife this morning speculated that a “frozen” box with sandwiches would be humorous (photo above); and it was… nothing humorous about the sandwiches though, those things were seriously delicious!

And although the sentiment projected by news outlets shows a positive people’s view towards tighter regulations and investor protection (even though these same people lose more and more market share and are in danger of closing shops), it seems that industry participants have other views as well that they don’t publicly share… why, I do not know. It’s not constructive not to express one’s thoughts therefore we decided to do it for you.

When you go into buying property, does the seller give you – without being asked – a file with the property’s historical breaks and fixes (a.k.a. fines disclosed on a broker’s website), does he tell you what’s about to be broken (plumbing, electrical, tree roots that will slowly elevate your house),do you know if there’s a cat buried in the yard? Where are the corresponding directives/authority guidelines in this case, limiting the leverage, the distribution and/or sale accordingly?

When you get into a casino and you’re about to lose your life savings, is there anyone limiting the amount of chips you can use on tables? Is there a risk warning hand-stamp on entrance and/or on the casino sign and/or on the chips and/or on the tables in front of you saying “gambling involves significant risk of loss?”, is there a prohibition of specific tables that you’re not allowed to go and empty your wallet?

When you go buy a car and you’re about to damp 30-50K on a second hand SUV or a shiny looking vehicle imported from a dark corner of the world, is there a limit on the incentives the seller is providing to get the thing off his hands? Is there a negative protection rule in case you need to spend double the money fixing that shiny looking piece of garbage?

My point is that more than a decade in the financial services industry can testify to the fact that investors that look into speculative markets, get into them knowing exactly what the risk vs. reward ratio is. Putting in place a framework that colours a personality on a faceless sinkhole is a great idea, welcomed and supported by every single participant. Shouldn’t we be careful though not to deviate too much from the point of it all and as a result redefine words like speculation? It’s a Google definition after all…

Not to level everything, we were never really advocates of specific products ourselves like binary options and we always urged caution towards them. We were also against vile marketing/sales practices that turned more and more people against the idea of FX trading, we were against lists of leads being harassed and funnelled like dirty laundry.

That being said, contracts for difference (CFD’s) and margin trading are exactly what their names imply. Trading on contracts with the use of margin, maximising your potential gains/losses through leverage and you being the sole decision maker of when you want in/out. And so industry participants with opinions they don’t share, would want the leverages where they are – more like back to where they’ve been – they wouldn’t want prohibition but instead regulation on the marketing, sale and distribution of financial instruments, they would want a strong framework fearful enough to any party not willing to comply. They also wouldn’t want taken away, the thing that makes the market tick.

And I don’t mean supply and demand, but the ups and downs of traders, beginners or not, who even though they constantly complain to the regulators (because they can), they get angry because they lost a trade or even broken because they lost everything they own, we all have to remember that these same people will eventually register with another broker, they will demand high leverages, lower stop out levels, bonus on their deposits, referral incentives and lower spreads and so the cycle goes on and on.

Just like there are no limitations in the examples above, maybe there should be grounds for more exceptions in the speculative world of financial instruments as well. But in the end, who are we to consult on how laws should be drafted, we just gave our 2 cents to anyone who cared to read.

#carebearwhoreads, #frozen, #cfds, #mifid, #regulation, #speculation

MiFID II / MiFIR ladies and gentlemen – if you’ve got an issue, here’s a tissue… with a twist

MiFID II / MiFIR ladies and gentlemen – if you’ve got an issue, here’s a tissue… with a twist

Following a decade of regulated activities that MiFID I introduced when it became law in 2007, participants of the financial industry are now facing one (more like two) of the biggest challenges they faced to date. “Dr. Evil” – MiFID II – accompanied by “Mini-me” – MiFIR – have been the subject for debates, lobbying and groovy contests these past few years. Are you ready to face reality?

The new Directive and Regulation were created back in 2014 and will become law in January of 2018, following a series of uncanny practices (Libor and FX fixing/rigging – in this doc referred to as “situations” which is French for situations), relating to deeds of banks and institutions whose greedy, slimy fingers are a disgrace to what the industry stands for. Who can really blame though someone (some more than one) who, given the opportunity to pocket gazillions, his/her conscience is not enough driving force to stop them? Oh well, maybe (and I say maybe) if we were in their shoes we would probably do the same, but since we’re not, we might as well keep name calling and blaming them for everyone’s misfortune.

Past the name calling though, we thought a good idea to share our understanding and views on the matter, written in plain English for the faint hearted and allow room for simple yet beautiful brains to comprehend. Remember magistrates of the world, that we train sales teams. We don’t draft laws so give us a little credit for understanding this much. So here it goes:

 

In simple words, MiFID I consists (ed?) of 73 Articles which cover(ed?):

 

  • Conduct of business
      • Best Execution Policy ensuring all reasonable steps were taken and enforced by institutions.
      • Suitability and Appropriateness tests, usually performed through the registration process, client categorisation, conflicts of interest identification.
      • Investment advice , inducements.
      • Handling of client orders to ensure firms are acting in the client’s best interests.

     

    • Compliance
      • Licensing, authorization and passporting.
      • Compliance monitoring, record keeping, internal and external audits.
      • Corporate Governance relating to how companies collect and store client information.

     

    • Transparency
      • Pre/post trade reporting so as to prevent market manipulation (see the irony or is it just me?)
      • Systematic Internalisers executing client orders against their own books or other clients.

 

The new-fangled monster called MiFID II consists of 97 Articles and MiFIR (mini-me) of 55 Articles, which cover:

 

  • A new regulated trading platform, abbreviated OTF, since it stands for Organized Trading Facility:

It’s a multi-lateral system (that is not an MTF or RM) and allows buying and selling in a form that creates a contract.

It aims for more transparency and structure to OTC trading.

– Through tighter exception rules (more on this later), publication of trade details using an Approved Publication Arrangement (APA), reporting of data to national authorities to vet on pre/post trade transparency/translucency/vale-on-vale-off.

– Demands more “neutral” operators; it restricts execution of client orders against the operator’s own capital. Discretion is permitted under specific circumstances.

 

  • Extended Trade and Transaction Reporting:

Under MiFID I trade reporting, the buy side could avoid reporting all together through an exception. Under MiFIR (mini-me), this exception a.k.a. expressed agreement of who has the obligation between the buy and sell sides, is not possible.

Under MiFID II transaction reporting, the buy side may rely on its broker to create a report (on top of their own) on its behalf through a transmission of order arrangement. Buy side must accept though that the information necessary to complete such a report are detailed (report field numbers sky rocketed), they are personal and may well conflict with best execution requirements. Food for thought – will all transactions – even with non MiFID brokers – be reported by the sell side? (How do you like your thoughts, rare, medium or well-done? now wait, there’s more…)

Words like MiFID I’s “reasonable” Vs MiFID II’s “sufficient” referring to the steps taken to achieve best execution results, already wreaked havoc since as ambiguous as they sound, minimum standards that are not defined must be met.

The execution per category of financial instruments must be published. Constant monitoring of the effectiveness must be in place with adequate adjustments when necessary.

 

  • Enhanced Investor protection:

By forcing firms to provide total overview of expected costs and must inform their clients about the way these costs are charged.

By forcing any “independent” investment advice to actually be independent like it should from ground zero (ground zero is the day the words independent investment advice were connected and meant just that). If it’s independent or non-independent, it must be communicated before the advice is given.

Also through enforcing research that once was offered for free by the sell sides (investment bankers, commercial bankers, stock brokers, market makers) to buy sides (mutual funds, pension funds and hedge funds) in exchange for transactions placed with their banks and brokerages, to be now paid. Some of the aftershocks of this quake aka quacker, aka quackadoudledou, aka quakabanga (see what we did here? Ninja turtles? No? ok moving on..) include but not limit themselves to these:

  • – Buy side will probably not be willing to pay for the analysis, mid-tier providers will stop producing it, distribution of a number of funds will be reduced since they will not have enough information to invest in markets unfamiliar to them, there will be lower liquidity for smaller and mid-tier stocks and finally widening of their spread (which is the opposite of what MiFID II was targeting in the first place… Ouf..now I can breathe….
  • – The ones that walk among us with the supernatural gift should begin to see the ghosts of small to mid-tier research providers whose struggle to stay in business signified their doom. To return to the living, they must match the quality of top tier research providers (here lie the ruins of your dreams to become a mid-tier research provider…)
  • – Specialists and/or niche research providers will have their 5 min of fame since buy side willing to buy research will go after their service, which might well be in competition with top quality service providers. You see their pizza is now pizza special…

 
Stricter corporate governance:

Since board of directors of institutions (including non-executives) must pay attention like good boys and girls, be aware – better yet awake – of the activities and attend their meetings for real (yes I wrote “for real” in a document that describes highly sensitive, regulation matters).

 

Algorithmic and High Frequency Trading requirements:

Systems that aim to control the execution of algorithmic trading in the marketplace.
 
Product governance and supervision as in:

National regulators can now ban and/or restrict marketing, sales, practices, activities and products they don’t agree with as they see fit. We should also see higher fines, penalties, reprimands and of course Santa not delivering gifts at Christmas.

A manufactured financial instrument must have a measurable target group whose needs, characteristics and objectives are met. The strategy for distribution must be appropriate and consistent with this target group and its potential risks to the target group consistently re-evaluated.

 

Non EU firms selling to EU citizens:

Although full harmonisation was not possible since EU member states can continue to apply national rules, it remains a choice of the national regulator to:

– Enforce a detailed set of rules set by MiFID II, designed to harmonise granting access and the compliance requirements of the non EU firm, in order to be authorised to provide services in its country (the rules don’t include dress code, food preferences and opinions on space exploration).

– In the above case, the non EU firm can provide services to these clients only through an authorised branch, compliant with these rules. That being said, MiFID II will Europeanise y’all, whether ya like it or not.

– An authorisation can only be given to branches whose mama-firm is authorised already in its own country to provide all services it’s applying for. If some of the services are not regulated in the mama country, they will be restricted in the EU Member State as well. It goes without saying that it’s a no-no to unregulated branches as well.

– A cross border service can be provided to eligible counterparties and professional clients if the non EU firm is authorised by ESMA, who will only register countries whose legal framework is equivalent to MiFID II and both co-operate on a supervisory level through the exchange of information (among other things).

– All entities trading with European counterparties will be required to obtain legal entity identifiers (LEIs) which they need to store in their reporting system. No LEI – No trade; or something like that…

 

The sales function never really saw eye to eye with compliance and laws that only add more obstacles when trying to meet your goals. It’s also a fact though, that if these laws did not exist, sales people would rule a world where there is  no more money to target since all of it would fall into the hands of a few, opportunistic corporations that target loopholes and prey on the desires of  “investors” to force their hens to lay more eggs.

 

We should be therefore grateful that we have these “watchdogs” as many times referred to by news outlets, regulating these fellows and allowing room for a healthier financial industry that enjoys its eggs in a fashionable and fabulous manner, whether runny, scrambled, omelette or poached (no pun intended).

 

#mifid, #mifir, #egg, #eggplant, #ninjaturtles, #mini-me, #watchdog, #doubleeyedog, #tomandjerryanddog

Q&A on allFX-Consult – 7th issue of Game Changers magazine

  1. Published on the 7th issue of Game Changers magazine – pages 31-33

 

  1. Tell us a little about your background

June of 2016 marked my 10th year in this amazing sector. With a BSc in Economics and Finance, my career path started back in 2006 within a highly competitive sales department. Loads of information to digest, not much competition market-wise, but due to the fact that the industry was still relatively “new” I still had to deal with general unawareness at the time regarding CFDs and forex trading. After 3 years of direct selling, networking and advancing as an industry participant, I looked for and challenged Executive Roles, where I managed Cyprus Investment Firms from the Director’s position, got deeper into the regulatory frameworks and gained a more complete understanding of the technological innovations that characterize the backend of a brokerage. Today, other than running the day to day operations of allFX-Consult, I also still maintain non-executive director roles on boards of Investment Firms.

 

  1. Why did you start your business?

Although today allFX-Consult is characterised by the three parts you see on the website, that is the Sales Department setup, the Full Brokerage Solution and the Institutional Program, our core still lies in the brokerage’s business development (sales) strategies, set-up and control.

 

Before allFX-Consult materialised into a complete brand, we saw a need for correct/educated sales department planning, since many attempts from brokers to find suitable department heads had no positive results. This could be due to the broker not being challenging enough, or not paying enough, or not allowing the person to reach full potential through the brokerage’s decision making. No matter what the reasoning, there was (and still is) a lot of Sales Director position “recycling”, departments left “naked” after the head would abandon ship and any work carried out thus far, rendered obsolete.

 

In the early days, there was no allFX-Consult brand. All our trainings and services were delivered at the broker’s locations just like we do now, but as independent contractors. With the number of projects growing fast, we saw the potential that a brand with online presence could provide, which evidently formulated what allFX-Consult offers and stands for today.

 

  1. Sales is a challenging department. Why would a brokerage choose outsourced help rather than an in-house professional?

Put very simply, because we’re the only ones who don’t approach this department solely based on our backgrounds and experience but rather on industry standards and targeted competitive analysis. Our methodology, developed and fine-tuned over the years, assesses how the brokerage came to be and where it’s planning to go, it identifies correct products/services relative to its target audience and the direct competitors, it renders the final product marketable and evidently saleable. In rare cases where the product is not saleable, perhaps the broker is unwilling to adapt or the business plans are not feasible, we will just not take on the project.

 

Once we on-board our strategies, the training does not only include employees and sales people but also the management on how to continue utilising our work after completion, without the need for us to be present. A sales department doesn’t need months to become operational. Depending on its size, the period can be a lot shorter. The fact that we carry on the work in such an independent manner, is one of the reasons we have lifelong contacts rather than clients and projects.

 

Another reason is of course the redistribution of business through our Institutional program, with our clients receiving business (as this comes to us) as high priority, a program that keeps everyone happy. So you can see why anyone that engages the services of allFX-Consult is a lot more than a client and partner.

 

What do you think about the latest CySEC decisions on the Sales and Marketing functions of CIFs?

I agree with them 100%. Through our blog or direct communication with industry participants, we always urged caution towards outsourced call centers, any so called “sales rooms” and anything scripted that takes away the personal, educated and human approach towards a potential investor.

 

How can a faraway country that doesn’t even know what the word regulation means, take on the role of the “income generator” of a broker, without overstepping boundaries, making false promises, begging and/or any other tactics they see appropriate to succeed in an aggressive industry like the forex industry. No ethical industry participant would be against these decisions unless they are themselves incapable of generating sales without offering investment advice, making fake promises, use aggressive tones and repeatedly harass their prospects.

 

This is also why we don’t take any/every project that requires our service. For example we refused a few brokers/sales teams that turned their back on education or required scripted answers from us. We also refused every binary project that knocked on our door since the first binary license was granted. Not sure if these made any difference outside our office walls, but at least for us it’s something.

 

  1. Can you give us an outline of where the strengths of your business are?

The biggest strength of our business is our network. Over the years we managed to form a web of individuals/professionals, brokers and service providers that combine forces to offer an unparalleled service under one umbrella that we called allFX-Consult. The years of experience, the personal approach to every case as well as our principles characterises our way of work and our partners. Redistributing networks, business, projects and funds all across our network’s spectrum and setting up yearly milestones, pinned our service right into the heart of the FX industry in Cyprus and abroad.

 

Growing with these important milestones, allFX-Consult is now more committed than ever to perform not as an individual agency but as a large network of professionals and institutions that exchange knowledge, ideas, business and wealth.

 

  1. Where is your business most applicable to; start-up or mature?

Both; any brokerage that comes to us, most definitely went through what we described above, therefore they will require exactly the same approach whether start-up or mature. We will still need to evaluate, create reports, identify strengths/weaknesses, adopt any differentiation strategies possible and most importantly train. Our training is characterised by some as “sociopathic”, reason being the emotionless approach to who is in front of the trainer, whether that is a sales person or a shareholder. When the correct answer needs to be given, everyone’s the same, irrespective if they are the ones writing our cheques. Usually if there is a problem with this approach, or we find ourselves stepping on people’s toes, then the project is doomed to fail, because apparently we’re not there to teach and/or grow with these people, but rather inflate egos and waste time.

 

  1. What are your plans for 2017?

We’re at a point now that we can setup a brokerage from scratch; from licensing to the formulation and implementation of operational strategies, we do it all.  This happens, not only through the people behind allFX-Consult but through this amazing network of professionals, providers and brokers, each with equal if not more experience to ours, combining their expertise to create something beautiful. New technological innovations, new providers, new brokers, new people are joining the industry every day and our goal is to know each and every one of them, work with each one and deliver the best possible service to whoever needs it. And what do you know? Maybe this can be our way of giving back to this terrific industry that gave so much to so many but receives so little in terms of feedback and recognition. We invite everyone to meet with us in person and find out for themselves just how far allFX-Consult can take them.

Forex marketing; looking good… what’s next?

Back in 2015, we published an article on iGB affiliate magazine on how to become a broker. In this article we briefly went over forex marketing questions that would puzzle a brokerage in the early stages such as “Should I spend in marketing?”, or “How much and when should I start spending?” as well as “is my spending enough?”, “should I spend more?” or even “should I stop spending completely?”

This section of the article generated a number of questions, we eventually received back as feedback, therefore we thought of elaborating more on the marketing part of a forex brokerage.

Although very specific and targeted, forex marketing evidently revolves around 2 essential parts:

1. Branding

2. Direct Response Marketing

 

Branding

When people hear the word branding, the hair on their back rise and I am almost certain I hear a faint growling noise accompanying their glossy eyes. Of course the thought crossed my mind too but I can assure you that they are not lycanthropes; it’s just that this concept and what comes with it are often misunderstood as soon as the costs associated with it are revealed.

What most of us don’t realize is how most marketing definitions and/or approaches often relate to one another although to make things simpler, branding mostly relates to identity, consistency and to serve as a brand reminder.

Solid branding requires a lot more work than people realize. The biggest mistakes forex brokers do when their long journey to acquire market share begins, is the lack of a solid industry research, correct product identification and competitive analysis that will help them define who they are. Colors and logos, imagery and brand books come next and are promoted in a consistent manner. Finally promotions, online and offline advertising, traditional and non-traditional marketing along with direct response marketing will complement a constant reminder of the brand alongside other brands. And what do you know? We just summarized branding in a nutshell.

 

Direct Response Marketing

So looking good now are we…? We’ve spent quite some time to reach this point, quite a lot of money to find our identity and project it, now we need to look into acquiring more clients, income and evidently market share. This is where Direct Response Marketing comes into play. To give this a proper definition, we’re looking into direct responses to the marketer’s campaigns and promotions using various channels. These channels include social media, newsletters, ppc campaigns, cpl campaigns, media buying and more. Through a consistent promotional way, standing true defenders of the mission, colors and imagery as those were derived from the branding analysis, the spend now turns to targeted promotional campaigns that drive traffic to the website, buyers to the product offering, partners to the overall venture.

 

The fake promises of forex marketing

What’s unfortunate in the above processes is how many people and companies will derail you with promises of cost effective and cheap ways to get great results. The fact is that a forex brokerage does not compete with the entire industry. Based on how they came to be and what they’re looking to become, the correct product will be identified alongside the direct competitors. How can someone actually go deeply through this process, then materialize a complete brand book and guidelines and finally implement all these through fresh concepts and ideas that will result in sales and income, with cheap and inexpensive ways?

It’s time to stop treating our brokerages like grocery stores or dvd rentals and assume position because the journey is long, tiring, expensive and so competitive that we will reach the end before we even consider to begin. The truth is that how we decide to proceed in the early stages, while the budgets are viable tools to push us to the next step, will determine our success or failure.

 

So before we look into the inexpensive, cheap and cost effective ways, we must accept that in the end we will get what we pay for.

The role of an outsourced service provider by today’s standards

Who wouldn’t prefer a full time employee to an outsourced service provider? It’s time to stop beating around the bush and face reality, even if it’s not what we want to hear.

It’s a fact that outsourcing is cheaper and requires fewer headaches than a full time employee. It also helps for a best targeted spend Vs result. If money is not an issue though, with the cost of hiring full time is often 4 times that of a service provider – not to mention the recruitment agency fee – then outsourcing is not on the table even for discussion.

 

The realization process – Service Provider is not an option yet

It takes a significant amount of time to realize you’ve made bad decisions. When you start counting your spend Vs income, when you quantify how much you progressed with your team and where you stand in the industry as a market player, you finally start pondering on alternatives to your current structure.

 

The scenarios – Could a Service Provider be an option?

There are only two scenarios to consider; in the first one you know what you’re doing and you’ll probably spot the problems before they become “make or break” holes draining your bank accounts. Outsourcing is now an option…

In the second scenario, you don’t know what you’re doing, the bank accounts drained already and the costs associated with your current structure are no longer viable. You then begin looking for alternatives, you probably decide to downsize and take over parts of the business that once belonged to your very expensive head of department. To make things even worse, all decisions are now biased and you’re looking for the cheapest solution to your business needs. And what do you know..? Outsourcing is now an option…

 

The facts – Which Service Provider do i choose?

If you are a broker of more than a year in the business, I guarantee you can associate yourself with the second scenario, since most brokers raise share capital as well as enough operating capital to start their business. The capital is then spent in the first year of operations in the battle to position the brand for the desired market share.

In an ever increasing industry such as the consulting services industry, the possibilities are endless; countless agencies are popping up, ready to serve on a small budget, whispering all the right words, words that you need to hear. Words that provide the feeling of “salvation” since you brought yourself at the brink of closing shop.

 

Conclusion – The correct Service Provider, is the only option

The point is not to allow yourself to reach that point. Evaluate all options when the business is strong, well-capitalized and allows room for changes that can be adopted fast. All necessary considerations must be put on the table at an early stage and educated decisions to be taken always based on industry standards and correct competitor analysis.

Once there is a strong base and foundation set-up, be sure that you secured a few more years as an industry player and can reconsider your spend accordingly. An absolutely fantastic time to employ more employees and heads of departments. Not to set up your structure, but to strengthen it with their expertise and hard work.

Departments that are built around people are the most costly and least viable.

Departments that are built around industry standards, competitive analysis and decades of experience, will be with you fora long time.

Why outsourcing to call centers and/or lead generation companies, for FX leads should be avoided

Our industry receives daily harsh critiques from investors, economists, regulators, any professional academic or not relative to the intentions, practices and professional conduct of brokerages. Now the disappointment continues with the uncanny practices of call centers, proving once more that things are not getting any better.

Back in 2006 when we first joined the industry, our Sales tactics were limited to an introductory script and our willingness to learn, a much needed tool to help close a sale. You see competition was not as fierce as it is today, products were limited to simple structures and the idea of trading in foreign currencies was as simple as 1,2,3.

Today though, with the number of brokers increasing rapidly, systems and product diversification, personnel being recycled like beer bottles and the cost of base salaries doubling or even tripling – not taking into account commissions on earnings – we resulted in practices that make no one proud, conduct far from professional and continuous loss of the potential customers of tomorrow.

 

Call centers in a nutshell

The latest trend in outsourcing, are the call centers; boiler rooms with hundreds of uneducated people (uneducated relative to the market), following scripts and lists of unaware “potential leads”, being funneled like dirty laundry and categorized according to their interest.

Not only are these “potential leads” being bombarded with daily calls, but we found out that they are also being harassed even when they say they’re not interested. Through categories, the “potential lead” just moves to a different person whose role is different than the previews caller and so on and so forth.

It’s inevitable that while industries grow, chop shops like these pop up taking advantage of the market’s needy and greedy faces, disregarding human rights, privacy and ethics. And due to our competitive nature, we continue to follow one another, while these chop shops take advantage from the scraps. Unfortunately the scraps in this case are decent people that found themselves in these lists and are being harassed day in and day out.

Using high pressure sales tactics, uneducated and scripted words, begging if nothing else works and inappropriate follow up methods, it’s time for brokers to open their eyes and stop being part of this madness before it spirals out of control. If you’re lucky, these call centers are not using your company’s name to sell your product, although highly unlikely. Therefore their practices are now your practices, for which you have absolutely no control of.

 

Our advice to all brokers who are reading this article is to avoid FX call centers and FX lead generation companies.

It is a counter productive method of acquiring clients and it causes “prospects” to want to disassociate themselves with the market completely.

There are simpler ways to acquire new customers, if no-one in house can help, outsource it as a needed service to people/companies that can create positive steps ahead for your business.

FX Sales is a lot more than a cheap chop shop; it’s art and should be a treated with respect just like the people you are selling to.

CySEC License – What is a CIF and what are the application requirements?

Updated 2019 – Since we started offering complete Forex Brokerage Solutions, one of the main questions we’ve been receiving regarding licensing, relates to the requirements necessary to submit a CySEC license application for a CIF.

allFX-Consult outsources this to experienced offices in Cyprus that specialise in this regard. We do not undertake licensing projects, in any jurisdiction.

Everybody sells “experience” but if you choose the wrong office for your project, you will unnecessarily lose loads of time and money.

For the past decade, we have worked with almost every office offering these services so let us point you to the right direction, and your next moves can be viable.

 

What is a Cyprus Investment Firm (CIF)?

 

  • A registered, regulated and supervised firm, reporting in regular intervals to the Cyprus Securities and Exchange Commission (CySEC).
  • CIFs must be licensed by the Cyprus Securities & Exchange Commission, which is the relevant regulatory and supervisory authority.
  • A CySEC license application is necessary to be submitted, with the Investment and ancillary services the CIF is planning to provide (Please see below all services).

 

CySEC License – Investment Services

 

  • Reception and transmission of orders in relation to one or more financial instruments;
  • Execution of orders on behalf of investors/clients;
  • Dealing in financial instruments on own account;
  • Portfolio management;
  • Investment advice;
  • Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
  • Placing of financial instruments without a firm commitment basis;
  • Operation of Multilateral Trading Facility.

 

CySEC license – Non-Core – Ancillary Services

 

  • Safekeeping and administration of financial instruments for the account of clients (includes custodianship and related services such as cash-collateral management);
  • Granting credits or loans to an investor (to allow investors to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction);
  • Advice to undertakings (relating to capital structure, industrial strategy and related matters and consulting, and services in relation to mergers and the purchase of undertakings);
  • Foreign Exchange services (in cases when they are connected to investment services);
  • Investment research and financial analysis (relating to transactions in financial instruments);
  • Services relating to underwriting.

 

The CySEC license application requires the following documents:

 

  • Completed application form as provided by the CySEC (recent)
  • Information about the directors, managerial staff and shareholders with special participation (for example CVs, completed questionnaires as provided by CySEC etc)
  • Company legal documents (certificate of incorporation, Memorandum and Articles of Association etc)
  • Certificates of the registered office in Cyprus
  • Certificates by the Republic of Cyprus confirming the Directors & Secretary of the Company
  • Group structure
  • Organizational structure
  • Clean criminal records and Certificates of Good Standing of the shareholders with special participation, the Board of Directors and employees of the Company
  • Company procedures manual for all activities and operations
  • Together with the above document bundle, a three year business plan, the internal procedures manual and anti-money-laundering and know-your-client procedures must be filed with the application.

 

Share Capital Requirements

 

125,000 Euro:
  • Reception & Transmission
  • Execution of orders on behalf of clients
  • Portfolio management
  • Investment advice

 

730,000 Euro:
  • Dealing on own account (market maker)
  • Provision of underwriting services in respect of issues of financial instruments
  • Reception & Transmission
  • Execution of orders on behalf of clients
  • Portfolio management
  • Investment advice

 

Employees of the CIF – Managerial positions may require certificates (Basic/Advanced examination)

 

  • 3 Resident Directors and 1 non-resident (if need be)
    • Two Executive Directors
    • Two Non-Executive Directors
  • Money laundering, risk manager and compliance officer
  • Head of each department
    •    – Dealing Room
    •    – Sales,
    •    – Backoffice
    •    – Dealing on own account
    •    – Accounting
  • Internal and External Auditors

 


 

Important Notes

It’s important to consider that the above is for information purposes only. The actual requirements will be thoroughly discussed with the application promoter that will handle your CySEC license.

There is no “guarantee”, no matter what people/companies tell you regarding the time frame to receive a license and/or a successful application outcome. The granting or rejecting of the application as well as the complexity of each application determines the outcome and the CySEC committee is the sole decision maker.

CySEC is an independent public supervisory Authority, currently supervising over 500 entities, of which 208 are Cyprus Investment Firms, 155 are Administrative Service Providers, the Cyprus Stock Exchange and 12 issuers registered in foreign markets (information taken from a public document published on CySEC website).

 

You might also be interested in:

Understanding the nature of a Forex IB

What is a Tied Agent | Definitions and detailed information

Worldwide Forex Regulators, by region.

 

How allFX-Consult can step into this picture:

 

allFX-Consult is a boutique forex consulting agency, catering to quality rather than quantity. For over a decade, our Directors have been connecting with some of the best individuals/professionals, service providers and brokers the industry has to offer ensuring we can meet any corporate challenge relative to how to start a forex brokerage.

allFX-Consult always has a counterpart/partner for any corporate structure. Before we connect anyone, we thoroughly examine all possibilities.

We’re chosen for being discreet, detail oriented and deadline driven.

Contact us for a private conversation to discuss your case through the contact form or one of our emails at info@allfx–consult.compartners@allfx-consult.com.

 

SPREAD THE WORD; Fight Unemployment in Cyprus

An initiative of allFX-Consult

 

If you look up definitions relating to unemployment you will see terms like voluntary, involuntary, cyclical, Keynesian, frictional, structural, classical, seasonal, hardcore and hidden unemployment.

So many “names” for a very straight forward issue. Do they really matter?

As of June 2015, cystat published that the unemployment in Cyprus is 40,876 persons, up from 39,672 persons, according to the previous month report. You can click here to see the reports.

The recent crisis in Cyprus as well as the current economic situation in Greece, has left us to ponder on whether or not it is logical to expect a better, stable and more promising tomorrow. That is not only for our own personal finances but also for our community. With financial statistics and economic speculations bombarding us every day through the media as well as informal discussions, some of us raise the stakes and wonder “what are WE really doing to help with the situation”?

 

About allFX-Consult

 

allFX-Consult is an FX Sales and Operations consultancy; we train the non-experienced and give equal opportunities irrespective of one’s background or if they have a client base and/or portfolio. Since before its inception, allFX-Consult has always favored motivation, hard work and individuality, three very important characteristics one would require, in order to become successful in such a competitive environment.

The forex industry in Cyprus, has over the years supported the Cypriot economy by becoming a hub, for international entities that choose the island as a destination to establish their operations. Whether or not it’s due to Cyprus tax benefits or strong regulatory environments, the point is that these organizations choose Cyprus to carry on with their business. And yet, the majority of these entities still look for experienced candidates to fill their positions.

Decisions like this are what we at allFX-Consult consider a gamble. Why? Because it is an unfortunate fact that the greater percentage of experienced candidates, come with attitudes and needs that most of these organizations, especially start -ups cannot handle. This costly recruitment decision adds up to the constant recycling of personnel, moving from one organization to the next, hoping to find what might never be found.

 

SPREAD THE WORD; ight Unemployment in Cyprus

 

Within the 9 plus years, in which the consultants of allFX-Consult have been training candidates to fill sales related roles of forex brokers, we have come to the conclusion that if you give non-experienced individuals the necessary tools and knowledge, they can be as effective and productive, as the experienced ones, if not more.

allFX-Consult initiated the program “SPREAD THE WORD; Fight Unemployment in Cyprus”, a program that will give equal opportunities to hard workers, motivated individuals with no previous experience to join this ever increasing market.

All CV’s are welcome, from any background and any nationality, so be a part of this fight against unemployment in Cyprus and SPREAD THE WORD that allFX-Consult is ready to help build a stronger, financially stable community for all and crush the statistical numbers that plague our community in the recent years.

Opening a brokerage; achievable goal or far-fetched dream?

Opening a brokerage; achievable goal or far-fetched dream?

Published on iGB Affiliate magazine, issue 51 June/July 2015, page 50

If you are an affiliate and currently working with an FX or Binary Options broker, have you ever been frustrated at low conversion rates on your traffic? Have you ever asked yourself whether or not you could run the operation on the other side of the affiliate program you are signed up to? Opening a forex brokerage is not as big a stretch as you may think, although few are aware of what comes with it.

According to the Bank of International Settlements, trading in foreign exchange markets in April of 2013 averaged $5.3 trillion in daily turnover, up from $4 trillion in April of 2010. With estimates of nearly $8 trillion by 2019, there are no signs of slowing down. And still, recent years have left the forex industry with more challenges than solutions, more questions than answers and a lot of money and time wasted in advertising and selling the non-salable. Not only is the competition constantly growing, the regulators are placing more and more obstacles in the path of brokerages, thus making client acquisition harder, but the client base has also transformed into network and individual trading abusers resulting in low income generation.

How can a forex brokerage survive today’s climate of ever-increasing costs over income? How can business development be guaranteed in this unstable environment and how can wasted time/money be avoided in order to allow the establishment of a solid foundation and infrastructure to support future growth?

Forex Brokerages start out with set plans and proactive methodologies, but over time, they allow themselves to become reactive, a systemic approach towards operations that will eventually kill the running system and require refreshing and starting over, if not a complete shutdown. So it is imperative to build strong foundations that will work as a base for tomorrow’s activities.

 

Do you have the data to kick-start your forex brokerage?

It is a fact that the more data you have, the better your chances to acquire sufficient market share, expand your operations and grow. With targets hovering above every decision you make and every day costing more than the previous one, income generation is imperative, if not vital, to your rise or fall. Given the importance of data, this is an area where affiliates and participants in the gaming industry would have a clean head start should they ever decide to branch out and utilize their resources to start a forex brokerage.

 

Spend

Spending money to acquire data does by no means guarantee income. It is however among the first of steps required to get you where you need to be. Questions such as “should I spend?”, or “How much and when should I start spending?”, will puzzle you in the beginning, while over time, you will grapple with questions such as “is my spending enough?” and “should I spend more or stop spending completely?”. Marketing spend always played a big role in brand awareness although with today’s social media and free educational material, this has become a little easier for start-ups, because as prospects strive for quality in their decision making, they will need information.

 

Educate

Education will be imparted by your team which needs to either have acquired this from past experience or from you. Hiring experienced people can reduce training costs and the time it takes them to get up and running but they can bring with them bad habits and divergent ways of working that you may need to control. Are you capable of training newcomers and developing fresh ideas to push your business forward as fast as possible?

Putting the right team together is among the most important things you will do. The time when we could give our sales team one page with reading material, send them off to call prospects and generate income has passed. Not having enough knowledge to promote themselves and their organizations will result in a complete alienation of your lead database. The prospect will immediately see through the weak sales rep, the conversation will be over, and it’s then very hard for any future positive interaction to take place.

The above is but a short introduction to the back-end of running a forex brokerage. There are various solutions when it comes to deciding how to start, and these can be discussed with any broker directly, or a licensing agency that can set you on the right path. It is imperative that you pay close attention to the overall operations and correctly structure your strategies towards income generation, from the very early stages. While the level of competition and the challenges have increased in recent years, the overall market is only growing stronger, offering plenty of opportunities for a newly formed forex brokerage.

Irrelevant Leads Vs Canvassing for Prospects; Make or break or…blame?

Irrelevant Leads Vs Canvassing for Prospects; Make or break or…blame?

And so it begins… you pick up that phone, you dial a number and YES, you get an answer… at the other end of the line an angry, tired from a difficult morning at work individual, who registered on your website because he saw a promotional banner that he doesn’t remember, doesn’t know what it is that you do and has no interest whatsoever in spending any European, American or Japanese currency on your offering.

On the other hand, online and offline campaigns, a massive pool of media buying options, countless possibilities for lead generation… With online marketing going nuke and the cost of acquiring more precious forex leads hovering above your rise or fall, I ask “is canvassing for prospects still an option?”

The general trend is that you still have the option to canvas for prospects. But then the dreaded report comes only to show that a massive percentage of your forex leads are indeed irrelevant. I named these leads irrelevant, since the term is synonymous with not here nor there, non material and unrelated. Since they have no idea what they’ve done, why they approached you, don’t know who you are, what you do or what you are offering, the term seemed appropriate.

While some people would argue that time well spent is time that makes money which reflects time spent where interested prospects rule, I will tend to disagree. With those irrelevant leads, Sales Reps differentiate themselves from the swarm.

 

Between these irrelevant forex leads and the goal of you making a paying customer out of them, lies a far thinner line than most Sales Reps think. This line includes:

 

Making yourself relevant to them before they become relevant to you
Spending the same amount of energy as you would on a prospect
Ask questions and understand the lead’s surroundings, work, interests to find a connection
Provide information and educate
Send material, links, videos, reading material to gain interest for further follow ups
and what do you know…? That report is not so dreaded anymore, is it?

We are living in the era of blaming each other and the same as in every civilized realization, we need to find someone to blame right? So if we’ve come to agree that canvassing for prospects is bad, who’s to blame for “it” happening? Definitely not the irrelevant forex leads that found a way to crawl into your report and surely not the Sales Rep that has not been educated about what sales are not about.

Sales are not just about knowledge and skills. Through time they evolved into a new-fangled monster called Attitude. So ask yourself and determine whether your attitude is to over think and canvass rather than closing one more sale.

 

Conclusion

 

To conclude, if you are a Director who promoted a Sales Manager just to fill a role, or a Sales Manager who accepted this role with not enough know how to carry out the task, or a Sales Rep that despite the aforementioned still canvasses to make a sale…

Can you now say “Guilty as charged”?

“Anyone can achieve their fullest potential, who we are might be predetermined, but the path we follow is always of our own choosing. We should never allow our fears or the expectations of others to set the frontiers of our destiny. Your destiny can’t be changed but, it can be challenged. Every man is born as many men and dies as a single one.” Martin Heidegger.