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Welcome back to another issue of the C-Suite, a once a month interview where we speak to senior executives from the retail trading industry.
This time we’re talking to Rajesh Yohannan, the CEO of brokerage group Axi. A lot has happened at Axi over the last couple of years, including a management buyout and the revamped launch of Axi Select. We talk all of that and more below.
DK: You and several colleagues undertook a management buyout of Axi at the end of 2022. Can you talk about that? What was the thinking behind it and what’s the ultimate goal? Are you looking to go public, for example?
To give some background, Gavin Ward, Louis Cooper, and myself were all at Oanda together. I was the regional CEO for Asia. Gavin worked for me as the head for North Asia, and Louis was head for Australia and New Zealand. Without going into too much detail, we were really the drivers in bringing in the private equity firm that bought out the original Axi owners in 2016.
In 2022, those investors were looking to get out, which is normal for private equity after that sort of timeframe. But even though we may not be the youngest group of executives, we were not in a hurry to get anywhere or retire.
And because we had some experience structuring this kind of transaction, after bringing in those investors previously, we said we’d buy them out. And that’s what we did. So today the company is owned and managed by the Axi management team.
DK: Ok, so what’s the end goal? Would you try and list the business?
This is a difficult industry to convince the market of, so it’s not a priority. If I think about doing an IPO, I would not want the company to end up being some illiquid stock stuck at the bottom of the market.
So to answer your question, we are not working towards an IPO. I think if we focus on our strategy, continue to put the necessary work in, then such a thing may almost happen naturally. But it’s not what we’re set on doing.
DK: Changing tack a bit, how is business in general? I mean, my impression just from speaking to people and looking at public companies and so on is that 2023 was quite a difficult year.
When I look at where we picked up the business and where we are today, there’s a significant quantum difference. It’s about four to five times of where we were in 2017. That’s not just in terms of volume and revenue, but also in terms of the sheer number of offices that we have, the sheer number of regulations that we have, the sheer number of people that we have around the world.
We’ve not had a loss-making year since then either. So yes, 2023 was a tough year for most people, but we were still far ahead of where we were previously and were still profitable.
And to be honest, I think that’s normal in this industry. You have harder years or periods. That’s just the way it is.
DK: Can you give some background on how you got into this industry? You were at Citibank for quite a long time I believe?
That’s right, I was at Citibank for over ten years. I had risen up the ranks as it where and, at a certain point, I had the offer to either become a country head or to become a product head. And the result of that was I ended up in what you would probably call ‘fintech’ today, although no one called it that at the time.
So I was doing a lot of the e-brokerage stuff, a lot of eFX stuff. And the lesson I took from that was the future lay in this cross section between finance and technology.
And that was when I had the opportunity to join Oanda, which fitted with that cross section. You know, it’s worth remembering that at that point in time, Oanda was worth more than LinkedIn. It was considered to be one of the most valuable startups in the world.
We managed to make Asia the biggest revenue contributor to the business. And that was where I met Gavin and Louis, who are now part of the Axi ownership and management team.
DK: Can you talk through how you have grown so much since you joined Axi. You look over that period and actually some firms have just totally fallen by the wayside. So it would be hard to argue it’s a case of a rising tide lifting all ships.
I should profess that internally we are actually extremely frustrated with the level of growth that we’ve had. We want to grow much, much faster.
Having said that, and this may sound like a very cliched CEO answer, but it’s absolutely true, I’m surrounded by people better than me.
I’m surrounded by people who know the industry a little bit better than me or some aspect of the industry a little bit better than me. And so I get a tremendous amount of leverage by the people who are around me.
The other thing that is perhaps surprising, is just how many things that are standard in other industries, aren’t in this one. A sensible approach to sales commissions, to give one example, or just tracking operations, whether its sales figures, new clients, risk management. So it’s putting these things into play and being disciplined with them.
The other factor is something I learnt at Citi, which is that you can take on the big boys, but don’t take them on in their own backyard. So we are not going to be pushing IG Group out of the UK. But there are other markets where their structure becomes a hinderance and we can beat them.
DK: Ok, going back to the point about it being a bad year, are there any acquisitions in the works or anything like that? It seems like there are always companies up for sale…
That is something we’ve done in the past. Since I joined Axi, we acquired One Financial Markets, and then two tech providers – Star Financial Systems and PsyQuation.
PsyQuation is more relevant to what is happening today. That is basically a product which connects to your trading platform and gives you a score of 0 – 100 as to how good a trader you are.
So would we make further acquisitions? Absolutely. But we are not doing it in an ego-driven way. If there is a value purchase to be had, absolutely. And in our heads, having done a few transactions in this space, we know what value is.
DK: Moving on to a different topic, you recently launched Axi Select*, which is like a funded trader programme. How is that going? What was the thinking behind it? I know some brokers are reluctant to add this because of fears around reputation and so on.
So to clear one thing up, Axi Select is actually not a new product, it was originally launched 12 years ago. Goran, one of the prior owners of the company, set it up and he would analyse trader activity, point out how people could improve and so on. The idea was that if they got to a certain level, the company would fund them.
The problem was that this was an almost entirely manual process, so it could not scale at all. I mentioned the PsyQuation acquisition. We did that to scale AxiSelect. The simple way to think about it is like a Fitbit. So you get a score and as your score rises, your capital allocation increases.
DK: One of the things here is that this is not being structured in the same way that other programmes are. So you do not offer this via a demo account. Someone has to actually make a deposit to trade with you. Why do things that way?
The way we like to think about the programme is that it’s similar to a sports programme. You know, if you play tennis, you may start at an academy before you are a teenager and play for years before you actually become a professional. Or if you want to become an engineer, you will train, whether that’s with an apprenticeship or studying at university. Again that process takes years.
And so my point in saying this is that we did not set up Axi Select to be a thing where we clip off $500 from you via an e-commerce transaction, without even doing KYC, and three months later you are going to be a professional trader. That’s not how this works, it’s a long process. So I appreciate we’ve launched this at the same time as a similar product that has come to market, but we are doing something quite different.
DK: So to understand, you can’t offer this in Europe, right? So where are you able to offer it? Where is it doing well?
We are seeing a lot of growth coming in from the Middle East, Latin America, Southeast Asia. These are markets that we are doing well in.
DK: Is that true for the company as a whole? It seems like you are doing a lot on LATAM from the outside
Latin America is a growing part of our business, but it’s by no means a significant part of our business.
On the back of the One Financial Markets acquisition that we did, the Middle East has become a very strong region for us. Southeast Asia is another big market, primarily because we have a lot of expertise in the region.
DK: With some of these emerging market countries, how viable is that long-term. You know there’s that famous de Gaulle quote – Brazil is the country of the future and it always will be…
I understand where you are coming from but I think if you take a step back, Asia has been the growth driver in this industry, as it has been for the wider global economy, over the last decade. Why is that? In simple terms, you have seen consistent GDP growth. That has led to more disposable income, which can be used to fund trading accounts.
Africa and LATAM, it is true, have struggled to deliver consistent GDP growth in the same way. But they have still grown in many places. And you still have plenty of people with disposable incomes, who want to trade the financial markets. So I would not be dismissive.
DK: If I look at the European market, it seems like loads of people are now trying to do commission-free stocks and branch out into other products. Is that something you would do?
We now have a proprietary app. It’s not something we’ve made much of but you are going to see a lot more traction around that. It will have everything, so the CFD products, shares, cryptos and, ultimately, the plan is to have futures and options too.
So it will be a fully-fledged app with different product offering being dependant on country and region. But that will take time and we think the CFD product is going to remain the core of the business.
N.B. Axi and TradeInformer have no commercial partnership. This views expressed above should not be taken as investment advice and/or solicitation to trade. Axi Select is not available in certain jurisdictions, including but not limited to, the UK, US, EU, Australia, and New Zealand.
