Juan please tell us a little about the Darwinex story and how the company has grown and is currently operating around the world.
Darwinex goes back to my brother’s love for the markets – and his realisation that making a long-term living only worked with investor capital. For the last decade (we started out in 2012), we’ve worked on each and every challenge facing a manager raising capital. Fast-forward to 2021 and we get the job done faster, better and cheaper than alternative offline and/or online alternatives.
How would you describe the mission and core values of Darwinex which govern how the business operates?
Our mission is to get traders and managers to tap investor capital. We’re named Darwinex because anything we do walks our “survival of the fittest” talk. We grant all clients an accessible, fair and transparent shot. We help and incentivise them to manage for the long haul and celebrate their success stories as inspiration for both us and all our existing and future clients.
What do your own day to day responsibilities within the firm usually involve?
We’ve grown quite a bit since the days of two brothers, our CTO and one Powerpoint! 10 years later, 60 highly capable colleagues have taken over more and more work from us. This pushed us founders to double down on our core strengths. These days, my brother lives and dreams about our product. Our CTO manages engineers to ever more performing and scalable platforms and algos. As for me, I’ve always been more of an evangeliser. My pleasure is to sign up clients, partners, employees (hopefully also regulators!) into our vision and growing movement.
Who are the key individuals in your executive team and what roles do they each have within the firm?
I’ve already covered the product, story and technology. Customer Success, Ops, Marketing, Compliance – all are now run by people cleverer and more productive than me! The key individuals are thousands of clients who hopefully feel valued and unique – they are what makes us all tick.
What markets and financial instruments does Darwinex support?
We’re a two-sided marketplace facing traders or managers, whose signals we purchase, and investors who back the strategies (we call them DARWINs) we package for them. At the time of writing, we support a universe comprising the most liquid instruments in each asset class. This includes the top 800 US stocks, 200 ETFs, 60 futures contracts, as well as every major FX cross. Instruments are available on Exchange (Cash equities, Futures and ETFs) as well as over the counter (e.g. CFDs & rolling spot forex). Investors access 3000+ proprietary strategies – DARWINs – via our “Exchange” (Darwinex is short-hand for Darwin Exchange). DARWINs are signals with our risk management overlay – which experienced investors back long term – or trade (they even come with their own API).
What types of clients are you serving and in what ways has this been evolving and changing since the business started?
Our client profile has professionalised over time, in line with the growth in our seed allocations and AuM growth. We support experienced retail traders, as well as professional managers and investors.
What range of platforms do you offer traders?
We’re now natively integrated with Interactive Brokers. This makes our offering (both execution and capital facing) accessible through a wealth of platforms and APIs, including TWS, TradingView, Multicharts, etc. Our CFD work-horse platforms are the proven MT4 & MT5 platform.
In such a crowded market it can be difficult to build a differentiated proposition. What sets Darwinex apart?
I think it’s our obsessive focus on traders and managers. Interactive Brokers & our broker gets them to market – we certify, validate and protect their track-record in one go. Thereafter, our franchise seeds managers, raises capital for them, until they hopefully graduate onto funded Hedge Fund managers.
We’re unique in that we’re every manager’s next step – regardless of at what stage they join us. And we pay them more, the better they manage!
Darwinex offers very powerful toolkit. Please tell us a little more about those?
Our diagnostic toolkit helps thousands of traders change their approach to the markets. Others pitch “leverage (and risk!) your 50k”. We challenge users to manage for investor profit. A big pride is having paid out millions to our fittest clients. We’d like to think that our algos and processes facilitated and accelerated client evolution.
What do managers particularly value about working with Darwinex? And why are more and more traders, aspiring and professional managers listing on the DARWIN Exchange?
We offer traders and managers a credible, merit-based path to extra revenue. Whether beginner or established wealth manager – all leverage solutions designed to make them grow. Challenging their inner manager helps them grow to their best. All build a track-record on competitive brokerage, grow to tap our seed allocation and graduate to monetize 3rd party capital via our Exchange concept.
So what do investors value?
It’s direct access. All strategies list on a single, transactional platform. We validate strategy track-records and control investor risk – all at arm’s length from the signal providers.
This frees investor time to focus on selection & due-diligence. The challenge is to pick good strategies – not to re-invent operations.
The concept isn’t new – the online application is.
What makes the Exchange approach credible? How does a Strategy Exchange align managers with investors? And how is the Exchange aligned with both?
We need providers and investors who succeed: good strategies beget investors, which attracts better strategies. The more investor profit, the more we pay for signals – and the better we do. The arrangement credibly signals a virtuous circle.
Should things go wrong… we’re the only party legally facing everyone. Everyone knows the buck stops with us.
Our story is credible because it’s internally consistent.
What role has technology played in the success of Darwinex and how are you leveraging it to attract new clients and further strengthen your offering?
We’re a FinTech. 80% of our workforce is financial and product engineers. We leverage proprietary software every step of the way from traders hitting the market, generating signals, all the way to investor execution. 95%+ of processes are automated. Our mantra is to build, monitor and service scalable tech which gives us unparalleled operational leverage. It also generates free cash-flow. Instead of advertising, we re-invest cash into educating existing users in making the most of an ever-improving platform. Our growth model is one happy client, one word-of-mouth at a time.
What services do you provide for institutions that are looking to partner with Darwinex? In what ways are you planning to further strengthen your institutional offerings?
There are 3000+ strategies to choose from. Regulated introducers and Independent Financial Advisors get to white- label both strategies and platform – for variable-only charges.
Our SaaS platform is hands down better than any infrastructure to deploy or distribute below e.g. €50MM AuM. It requires 0 up-front investment, and 0 running fix costs. And there’s no time lost on non-core activities (compliance, technology, legal, ops, etc.) – we handle them.
We’re improving the institutional offering by attracting proven institutional managers, who value our retail distribution channel.
What steps is Darwinex actively taking to attract a new generation of traders whose expectations in terms of product mix, platform functionality and trading opportunities are getting increasingly higher?
Execution only is an oversaturated market. Rather than pay less, we offer them to get paid – which I think is a different ballgame. The more investable they grow, the more we pay them. We’ve paid out millions to signal providers. Isn’t that ten times better than cheap execution? Especially if it’s included with execution?
Do you see increased regulatory oversight of FX and CFD trading as a positive step and an opportunity for Darwinex to differentiate itself still further?
We welcome any steps to improve retail product suitability, but it’s true that regulatory pressure is the main reason we’re diversifying onto exchange traded stocks, futures and ETFs. We welcome improvements in OTC regulation – with two caveats. The first is the feeling that more pressure was applied on regulated players than on unregulated, offshore ones. The second is consistency. How does capped CFD leverage compare with that implied by micro-futures contracts? Why not publish % of winners / losers for all retail products – and not just CFDs/FX? Is retail a level playing field?
What does your product development roadmap look like over the coming year and what new products and services are you planning to introduce?
There’s a lot on the pipeline:
- We will extend our exchange-listed offering to investor clients.
- We will likely deepen our integration with Interactive Brokers – offering existing IBKR clients the option to migrate their track record, keeping their funds with IBKR.
- We’re launching white-label products for professional managers and regulated advisors.
How ambitious are your global growth plans and what steps will you be looking to take to achieve these over the next few years?
We currently service clients from 80+ countries. Next year’s product roll-outs arguably complete our product – for sure we’ll continue to improve features, but the core is now complete. This makes now time for growth. Our customers like the service, but most of our targets don’t know us. We’re going to invest in fixing this. We’re building a sales force to reach our target professional manager and investor segments. Once we’ve proven the sales cycle, we’ll scale it.
Looking to the future, how do you see the retail financial trading market evolving and how is Darwinex preparing to capture the new business opportunities that this will present?
We’re betting that two megatrends will re-shape retail distribution. The first is Millennials coming of age. They don’t outsource investment decisions to “experts” – they’re far more likely to trust their personal circle or quite possibly handle themselves. The second is regulation.
Compliance costs are skyrocketing, offering sub-scale providers a compelling rationale to outsource to platforms. The threshold for a viable “traditional” has soared to possibly hundreds of millions of AuM. This we think makes platform/SaaS offerings attractive.