Just, Fair And Direct - JFD Brokers - A firm that’s determined to live up to its name

JFD Brokers has managed to achieve remarkable growth over a relatively short period of time, being ranked among the Top 20 CFD & FX electronic brokerage firms and Top 3 MT4 brokers worldwide. As it provides a unique model and approach to investing and trading, we asked Lars Gottwik, CEO of the firm, to tell us more about this and his plans for guiding the business in the future.

First Published: e-Forex Magazine 80 / e-Forex Interview / April 2018

Lars, we have heard that you are a passionate trader, so please tell us a little more about how you got into the world of FX and your own career background to date. 

I have always been an entrepreneur, although I began in a completely different industry. However, after selling my first business at the age of 25, my best friend who worked in investment banking got me interested in the financial world. Following a garden leave period of about 2 years which made it impossible for me to get back into the industry in which I had been running my business, I became fascinated by trading, which became my new passion.  Looking at the brokerage industry from a trader’s perspective, it became obvious after a few years of trading that there was a massive lack of brokers providing transparent institutional-grade execution to retail investors. That’s when I came up with the idea of setting up a brokerage that would revolutionise retail FX as we know it. This was the simple idea behind JFD Brokers. 

JFD Brokers has different divisions and subsidiaries focusing on different parts of the financial business. How is the organisation structured and what does each business unit focus on and provide? 

JFD has several brands and subsidiaries, which include JFD Brokers which addresses sophisticated retail trading, as well as an established German bank (ACON, soon to be JFD Bank) of which we recently acquired a majority stake. There is also JFD Germany which focuses on marketing and PR. Finally, we have Findilao, our new financial media publishing company. 

Our other trademarks include JFD Prime, JFD Wealth and JFD Partners, each serving different clients’ needs. JFD Prime provides turnkey Prime Brokerage solutions (white label, MT4/MT5 Gateway, FIX API), tailored for institutional clients. JFD Wealth is our asset and portfolio management division which develops algorithmic trading systems and strategies. Our goal is to deliver retail investors non-discriminatory, cost-effective and risk-averse access to the financial markets through an array of products and services typically reserved to the private banking sector, such as our unique JFD Basket Investor. JFD Partners is based on an innovative win-win-win concept where partners can carry out smart business and grow revenues, choosing from a variety of different partnership models tailored to suit their specific professional needs. We also have our in-house research division, JFD Research, which provides to the global trading community proprietary institutional-grade technical and fundamental research and analyses covering multiple asset classes, with a particularly strong focus on FX, precious metals, indices, commodities and stocks.

I am pleased to work with an experienced team of senior executives who cover most aspects of the day-to-day operational work
I am pleased to work with an experienced team of senior executives who cover most aspects of the day-to-day operational work

Can you tell us a bit more about your acquisition of ACON bank, and how this will affect your business?

Germany has always been, and still is, a core market for JFD, so we wanted to take things to the next level in this region. That’s why we consciously made this move into the banking sector, like other investment firms have done in the past (for example Saxo Bank). It’s all about the way we perceive ourselves. With this acquisition, the JFD Group is more than just a broker: we offer investment banking (capital markets, listings, equity and debt financing), trading and brokerage [execution (B2B and B2C), designated sponsoring], advisory (M&As, debt advisory and financing), as well as portfolio management. Owning our own bank is a natural step in the right direction. 
ACON will now be controlled in majority by JFD while the existing management, Dr Michael Hasenstab and Marco Bodewein will remain in charge. We acquired 80% of the company, with the potential to attain the rest of its shares in the future. Once we have settled the paperwork for regulatory approval over the next few months, ACON bank might be rebranded to JFD Bank, however there will be no changes to the business lines of the bank. This move signifies a strategic long-term investment for JFD. We feel it is the right time to create such a synergy, and we’re excited about this new venture. 

What do your own day to day responsibilities usually involve and focus around?

As the CEO, I am responsible for the strategic positioning of the firm, as well as the mid to long term vision. I am pleased to work with an experienced team of senior executives who cover most aspects of the day-to-day operational work, leaving me free to focus on how to strategically position JFD in such a fast-paced industry.

What really makes JFD Brokers different from many other brokers and what do you see as the key strengths of the company?

First of all, we see ourselves as a financial institution, where brokerage plays an important role, but so do the other aspects of our 360° business approach: asset management, research and IT solutions. When it comes down to our brokerage solution, our main USP is the transparency we provide around FX trading. We believe that everybody has the right to a just fair and direct treatment, and to transparency in their trading, which is why we offer all our clients (upon request) a unique Post-Trade Transparency Report. In fact, we pioneered Post-Trade Transparency, setting a new industry benchmark!
 
Another main strength also lies in the fact that unlike most of our competitors, we are one of the very few real multi-asset brokerage firms providing multi-asset trading [FX and precious metals, CFDs (shares, commodities, indices, cryptocurrencies, bonds, ETNs), physical stocks and ETFs] from one single account.

You operate a 100% DMA/STP Agency Model. Why did you decide to go down that route?

We wanted to stand out from the crowd, to offer something with a unique selling point. With our Pure Agency Model, we differentiate ourselves from the masses of brokers out there who are Market Makers and who benefit from their traders’ losses. In contrast to them, we only earn from commissions. Our profit margin may be tighter than that of Market Makers, but on the other hand, we have some advantages on the marketing side, which advanced and sophisticated retail clients clearly value. This sets us apart from 99% of our competitors. Also, we foresee that regulators will continue to strive to make the FX industry even more transparent, whereas we have already implemented most of the recent MiFID II requirements years ago.

What markets, financial products and trading services does JFD Brokers currently provide access to?

We have entered the limited, exclusive club of multi-asset brokers who offer all their instruments from a single account. Our clients have access to FX and Precious Metals, CFDs (indices, shares, commodities, cryptocurrencies, bonds, ETFs and ETNs), as well as physical stocks and ETFs – all from one account - something rare within the retail trading ecosystem. This totals 5000+ instruments for our B2C and B2B clients, all sourced from 20+ LPs (Tier1 Banks, Non-Bank LPs and MTFs) and global exchanges.

What types and varieties of clients are you catering for?

We cater to advanced and sophisticated retail traders (JFD Brokers), to small and medium size institutional clients (JFD Prime), as well as to investors who are looking for alternative investment vehicles in the FX world (JFD Wealth). Also, we accommodate IBs and affiliates (JFD Partners), with a goal to continuously grow our entire partner network. 

JFD has experienced tremendous growth and has attracted an impressive client base spanning over 130 countries across 6 continents
JFD has experienced tremendous growth and has attracted an impressive client base spanning over 130 countries across 6 continents

What range of trading platforms does JFD Brokers support and offer?

We focus our B2C business on the award-winning MetaTrader 4 and 5, which we all know as the most widely-used trading platforms for retail clients. When it comes to our German-speaking markets (our core business), we also provide execution on Guidants, Germany’s most popular trading terminal (in fact, we were the first brokerage to offer both FX and CFD trading on Guidants in 2016). For our B2B clients, we don’t offer any additional platforms as we focus on white label solutions (MT4/MT5) as well as liquidity provision via FIX API, OneZero Hub, and PrimeXM XCORE.

We were interested to see that last year you added the MT5 platform to your offering. How have you tailored the platform to give your clients even more features and functionality when using it?

In 2017 we launched MT5+, our elevated version of the highly acclaimed MetaTrader 5, available in desktop, web-trader and mobile versions. The goal of this launch was more to do with becoming a real multi-asset broker, offering our clients access to FX, CFDs and exchange-listed products from one single account. As with MT4, we added our exclusive add-ons to MT5, but as the latter is already an advanced platform which is very popular worldwide, our aim was not to improve things on the technology side, but rather to equip clients with the largest variety of trading instruments possible. We wanted to take this excellent platform and make it even more powerful by going further than anyone else has done when it comes to the number of tradable instruments. Our USP remains the broad range of symbols and asset classes that we offer on this terminal. In fact, we achieved the same with the MetaTrader 4 in the past, becoming renowned for offering the biggest variety of asset classes on our MT4+. 

We want to stand out from the crowd, to offer something with a unique selling point. 

JFD Brokers has consistently talked about fairness being a core value of the firm. Why is that so important to you and in what ways does your pure Agency Model help you to deliver it?

Fairness and trust are very important to me personally, and to JFD as a company. I knew it was time for a new, more sophisticated way of trading FX when I set up this firm. JFD Brokers not only abides by international regulatory standards, but we are the only broker that goes the extra mile by giving clients 100% Post-Trade Transparency. Our pure Agency Model ultimately erases any conflict of interest between us and the end-client, resulting in us becoming their advocate, trying to protect them (as far as we are capable of) from bad execution from the Liquidity Providers. For us, fairness can only be applied to all parties if conflict of interest is erased to the maximum degree possible.

I am enthusiastic about JFD’s future as a fully-fledged financial institution with its own capital markets, asset management and classic brokerage divisions.
I am enthusiastic about JFD’s future as a fully-fledged financial institution with its own capital markets, asset management and classic brokerage divisions.

Do you see increased regulation in FX as a positive step for everybody regardless of whether they are involved in retail or institutional trading? How supportive have you been with industry efforts to create a more fair and transparent market?

Yes, we see the increase in regulation in FX as a very positive thing. We view the measures taken by big international regulators –  for example: BAFin and the FCA, MiFID II and recent proposals for ESMA – to be as client-centric as we are. We are pleased that they are pushing a new standard which we, as a 100% DMA/STP agency, already stand behind - that of true transparency. That said, any step forward to make the OTC trading world more fair and transparent for the end-client is something we welcome with open arms. We even believe that regulation could be strengthened further, going beyond what is already put in place, to ensure that the end-client has a fair chance to make money by trading OTC, specifically foreign exchange.

Do you expect to see increased use of automated trading systems in retail FX over the next few years and what implications could that have for the way the market might evolve?

We have seen a huge trend into automated trading, especially with the rise of the MetaTrader platforms. On the other hand, we also believe that most so-called EAs in retail FX do not necessarily work, or are able to generate profits in the long term. This might be because of wrong incentives by IBs, the EA-coders or brokers trying to churn and burn the end-client.

When it comes to portfolio management, we are a fan of quantitative and algorithmic trading strategies. In order to give end-clients access to the strategies and the possibility to trade them, we foresee a trend where companies like JFD, or other real STP firms, act as a business incubator by promoting really sophisticated algorithmic or quantitative strategies to the end-client, making them accessible either via sophisticated copy trading set-ups (which are executed in a bulk execution mode), or via managed accounts.  We still see a huge gap where sophisticated retail investors are desperate for alternative investment strategies, especially during this period of zero interest rates, but we also believe that most of the time, end-clients do not have the relevant expertise to either code an automated strategy or judge whether this strategy can deliver a positive result in the long term. This needs to be done by companies, like JFD, which focus truly on the profitability of the end-client. 

JFD Brokers operates what it calls “smart partnership models” and last year you launched a new franchise program and dedicated partnership website: www.jfdpartners.com. Please tell us a little about the range of partnership services that you offer.

Our partners are important to us, which is why we created a website and programs especially for them. We focus on an innovative win (client) - win (partner) - win (broker) concept. There are a variety of progressive partnership options for our partners to choose from, each model tailored to suit specific business needs. For example, non-licensed Intermediaries can profit from our affiliate setup, monetizing their web traffic. For Introducing Brokers (licensed broker dealers, or those who want to be licensed), we have another plan with a competitive rebate and service package. And, as you mentioned, we introduced a new franchise program last year, where partners can become more than just an IB by building their own regional office. This empowers them to expand their business under the name of JFD in their territory. In effect, they are joining the JFD family by introducing their company as a part of the JFD Group. There are many advantages to partnering with us. We offer a wide range of services from full training programs to marketing services. Partners can expect long-term revenue, better live account conversion rates, extensive business development support, and a diverse portfolio of innovative investment products. All of this, in addition to JFD’s renowned robust and scalable IT infrastructure and fully transparent and licenced operations.

Let’s talk about the growth of the business. You recently hired a new Head of Asian Markets. How important is Asia to the company and what are your efforts focused around at present in that region?

JFD has experienced tremendous growth over the years - we have attracted an impressive client base spanning over 130 countries across 6 continents. We have also grown internationally as a company, opening our most recent office in Shenzhen, China. As we extend into other European regions, we are hoping to expand in Asia, the biggest continent in the world. We are focusing on Asia as it is an untapped and important market for us, with great potential. We are seeing a growing appetite there for more sophisticated brokers, as traders evolve in terms of trading knowledge. We feel it is the right time to enter this market, as it is increasingly becoming more advanced and open to our value-added proposition. 

JFD has proven itself to be a game-changer, disrupting the traditional retail FX trading model and always striving to be the best CFD and Forex brokerage. Having accomplished the tough task of becoming a true multi-asset broker in such a competitive industry, how do you see the future of the company and what are your goals for the coming year?

As we move into the future, we are focusing on our international growth, as we expand further into untapped markets such as Asia, MENA and Africa. Additionally, we are concentrating on the fact that we have the most powerful MT5 out there, offering the most asset classes including exchange-listed products, such as real stocks and ETFs – all from one account. We will continue to add more instruments to extend our offering and give our traders more options.

By entering the banking sector, with the acquisition of ACON, and becoming a full investment bank, I am enthusiastic about JFD’s future as a fully-fledged financial institution with its own capital markets, asset management and classic brokerage divisions. We firmly believe that we will be able to increase the global reach of our brand as it strengthens day by day. JFD will continue to break new grounds within the broker scene, with new services, products and developments, such as our new financial media publishing company Findilao, whose goal is to provide a way to help experts monetize their skills internationally. 

Finally, I am very grateful to all our business partners and clients for selecting us over the years – their loyalty and support has enabled our continued growth, and helped to make JFD the respected and successful company it is today.