In Eastern culture its considered important to look back in order to see what lies ahead.
In 1271 Marco Polo left Venice for the East in search of a transaction.
Chinese silk at the time was the highest luxury item in Europe upon which a great margin could be placed. Whilst not exactly a low latency journey – Marco discovered he was carried by an even greater commodity – The Horse.
European horses at the time were much larger than their Chinese cousins and highly prized for their military use. The resulting trade was very successful and Marco returned to Italy carving out what became the Silk Road on his way. It was an important and historical foreign exchange. It was therefore highly fitting that this years iFXexpo was held at the Venetian Hotel in the Year of the Horse.
It was a pleasure and honour to be MC of the event and whilst some say it felt like less people were in attendance this year. I’d say that is because the venue was much larger, less crammed and with a more professional feel.
While it might be madness to have an FX Conference inside a casino of all places, it’s relevance and importance grows which each event that passes.
There was a good selection of panels and workshops from the forever evolving basics of Liquidity, Execution, and Connectivity, to the more interesting New Technologies, Deposit Conversion, specialist and localised Marketing, Social and Mobile. The more topical Regulation and Domicile issues and of course the elephant in the room….. China.
PANEL 1 – New Products for Asia
We first went to Options – which aren’t new at all – but the proximity of binaries to a casino wasn’t lost. With some interesting statistics from Rachely Esman, CEO of MarketsPulse.
Where your average western based binary account pays circa $2k pm, in Malaysia its closer to $3.5k. Many of the short dated binaries are already algo traded –( which is a little like terminator versus the borg). With short dated options being the most appealing.
All agreed that Asia was the biggest market by far. Mr Steven Reiter, CEO of Sentry Derivatives spoke of the difference between betting versus European digital in the professional market and reminded attendee’s how, on exchange and OTC the option writer is richly compensated on the premium income as up to 80% expire out of the money. But that was still more for the advanced trader and not the man in the street.
Other new exciting products for Asia include Gold.
India has restrictions on it and yet also has a gold season – whilst Chinese demand continues to grow. In the west it’s seen as a commodity to trade with the occasional flight to quality – in the east it’s more a long term store of value – more of a buy and hold approach.
Very few operators have a licence to offer gold in China and Mr Tamas Szabo, IG Group’s Regional Head for Asia-Pacific suggested buying on dips before the Chinese buy it all.
Something that does not have a store of value is Bitcoin.
Things move fast in a bitcoin world and even in the few weeks since the conference a lot has changed. Mr Szabo of IG told the crowd how they didn’t offer bitcoin anymore for many reasons. It has no credit so you can’t short it – leading to an imperfect market ( worth noting efficiency is one of Bitcoin’s USPs apparently ) where users tend to buy and hold – or in one case accidently leave $1m worth of bitcoin on the hard drive and throw it out with the re-cycling.
China had just weeks before banned bitcoin, blaming its popularity with illegal activities as the reason – which may well be true – but it was also very popular as a way to move RMB offshore and as several billion per month finds its way legally to Taiwan – one imagines the “illegal” route via bitcoin was similar if not more.
BINARY vs BITCOIN
The featherweight boxing match of the year produced some great response:
“ Binary – the fake option vs Bitcoin the fake currency – what could go wrong?”
In summary Bitcoin is really version 1 of a digital currency and there’s already version 2 sitting in the wings to replace it – and with 69 Binary providers currently under investigation by French authorities – it too was likely to evolve or be regulated out.
The real opportunity in Asia and beyond.
RMB liberalisation is a far bigger debate well beyond just Retail – but the Shanghai FTZ will make things easier and no doubt be the conduit from which liquidity flows. In case you were wondering. Decisions are in Bejing – access is in Shanghai. It’s far to say that when China grows the whole world grows with it.
PANEL 2 – ‘How to’ stories in Asia
This was the highlight of the event – the CEO’s of the 3 biggest brokers
Drew, Lars, Glenn, with Alex the PB and Andrew the Ozzie.
The ‘how to’ panel somewhat focused on ‘should have’ when it comes to Asia. Drew Niv of FXCM told a remarkable story of the FXCM exit from Japan for $42m only to see the market grow considerably after they left, and Lars speaking on how Saxo had held off entering Asia in a big way. Leaving both with some questions.
The deep insights ranged from “ Every country is different” to the need for “local people, and local management”. Customs, language and business practices vary greatly across the region and that needs to be accounted for in a successful market entry.
The Introducing Broker model is of course the easy way to deal with those issues and grow accordingly. Third party payments are popular which alas are illegal for US and UK firms to offer – creating an opportunity for the others. As a result Andrew Budzinski’s Australian based firm IC Markets has built a good franchise in China by using local partners
Japan and China featured heavily – where Japan is the best beta test market for new products as the Japanese require perfection in their services. While the Chinese and Japanese regulators have frowned upon Bitcoin and Binaries there had been a big increase in the use of established products such as CFD’s.
With Lars Seier Christensen of Saxobank seeing a big uptick in their use during last year.
Alex Knight of Citibank predicted the continued rise of Non Bank liquidity and more Non Bank to Non Bank trading. Something a group in London has been looking very seriously at for the retail sector.
Panel 3 – Mobile & Social Innovation in Asia
I’m always impressed and inspired by the innovations that come from the retail sector of the FX business. Many of those are in the Mobile space. Perhaps it’s the lack of screen space or the constant use of the device which is the mother of the invention. Whereas Social is most certainly in version 1 – but here to stay and to evolve considerably over the next 5 to 10 years.
In an interesting twist panel discussion led to the problems with handling such widespread and follow the leader flow.
‘The liquidity element of several thousand orders coming through a broker’s system is problematic.” said Hu Liang, Senior Managing Director of State Street Global Exchange.
“The industry is young, only 5 to 6 years old. Therefore it is fair to say that more liquidity providers and support services to brokers need to understand the impact of 100,000 traders all trading EUR/CHF in the Asia session, all in the one direction.”
On the mobile side the question of multiple languages ( and symbols ) was made worse by the different preference for certain handsets in different countries … this country likes iPhone … this one likes Android … this one prefers something else. “Asia is a diverse market and a mobile solution needs to be localized, said Rajesh Yohannan – Managing Director and CEO of OANDA Asia-Pacific.
Panel 4 – Marketing in Asia
It’s fair to say you can spend a lot and get nowhere on marketing. At the same time spend very little and go a very long way – the trick is often who not how much you spend on. Four guys in Cyprus can get you a lot more than a big agency in Asia.
Dukascopy’s Luis Sanchez explained “TV has been one of our key growth areas, especially in Asia,”. On the plane over and on hotel TV, I saw ads for no less than four FX brokers in a region where exclusiveness and luxury count for a lot
Now only in its second year the Macau event is famous for its closing party.
Last year’s Indian contingent returned with the Master of Magic and this time with a full Bhangra Band complete with Bollywood moves. However – Macau’s Portuguese roots supplied a Brazilian Samba band complete with Carnival dancers and drummers who glowed in the dark! The Jam session between them bought together two totally different styles under one beat. A very pleasing foreign exchange indeed.