At the end of August, TradeInformer visited Deriv HQ in Cyberjaya – an area on the outskirts of the Malaysian capital Kuala Lumpur.
I was there for a holiday, but serendipitously my visit aligned with a couple of big events at the broker. One is that this year the firm moved to having a Co-CEO model. Company Founder Jean-Yves Sireau and former Chief Operating Officer Rakshit Choudhary are now managing the business together.
The other point was that Deriv was close to hitting 25 years of business. This makes the firm one of the oldest in the industry. We chatted about how that happened, what the company is doing at the moment, and what it actually means to be ‘Co-CEOs’.
How did you get into this industry? Deriv must have been one of the first non-UK firms to be in the business.
JY: I got the idea around 1996 but it took me about three years to get the money together to launch it. The idea was basically just to offer online trading. At the time if you wanted to buy stocks or trade futures and options, it was all phone-based. The internet was still in its early days at that point and I figured, ‘hey, why not have a platform where you can do this all online.’
Originally it was called Regent Markets, right?
JY: Yes, the company’s initial funding came from Regent Pacific Group, which is a company listed in Hong Kong. They had 50% of the shares originally.
And it was also only binaries at that point?
JY: Yes, it was originally only options. Over time we’ve expanded into other products, particularly CFDs, which are the mainstay of the business now.
I saw recently you had your 25 year anniversary and when I think back to 1999 when you launched, there can’t have been many others – if at all – offering that product. I know IG had it in the early 2000s but were you the first to do it? If that was the case, did you have to create the product yourself?
JY: I believe we were the first and IG came next. The product already existed in the interbank market but not for retail. That was kind of how the company came about because I was managing a hedge fund previously and became very interested in options, how they were priced, structured and so on. So the goal was to make it a product you could trade online.
Do you two ever feel frustrated at the restrictions placed on those products, given that you were in business for about 15 years before the problems began. I suppose my point being, the product is not really the problem, but how it’s sold and used.
RC: We do not dwell on it but certainly, from the client’s point of view, it’s a product that is more intuitive to understand
JY: I agree, it’s not the product itself, it’s the way certain companies were promoting it.
You rebranded in 2020, was that problematic at all or difficult to do?
JY: Not really, no. We’d rebranded in the past and we had also got to a point where CFDs were the mainstay of the business, so it made no sense to keep the old name.
You two are now co-CEOs. How does that work practically and why did you do it?
RC: We have a very global business, so this allows us to be in two places at once. We are very closely aligned on how we see things and communicate a lot. So it’s really about that, we can manage the business more effectively this way.
JY: One thing I’d add is there cannot be any daylight between us, in terms of how we see things. And the positive there is that we are naturally very aligned, just in the way we think about the business and because we’ve worked together for so long.
So how long have you been in the business?
RC: I joined in 2009, so it’s been 15 years now. So we’ve worked together for a long time and often very closely. And so the Co-CEO arrangement was actually not really something we decided to do one day, it more just happened naturally because of the way we work together. But like JY said, alignment is the key.
And so what were you doing from 2009 when you joined?
RC: When I joined I had done a quant finance masters degree in the US. So for the first few years, a lot of what I did was on the trading team, pricing contracts and so on. And then I moved into a more managerial role in 2018 working on new products and operations, and then that changed to Co-CEO this year.
Maybe this a dumb question, but what does the day to day role of a CEO look like here? Are you having to get involved in lots of details are just manage people and tell them what to do?
JY: I think the first thing you have to do as a business is get a good C-suite. We wanted to get a good C-suite and we’ve managed to do that. We’ve got those people now and have for a few years. There is definitely a lot of people management there because you need to make sure everyone has buy-in on what you’re doing, but the difficult part does tend to be the layers underneath. How do you get people to work together towards common goals? That can be a hard thing to do.
Post-2018, it seems like you have a few companies who continue to focus on developed markets and want to be something like Interactive Brokers. Others have focused on emerging markets and continue to really focus on CFDs. Would you say you fit into that latter category?
JY: Absolutely, I mean the rest of the world is growing and experiencing economic growth. That’s where the future is. So it makes sense to expand where growth is.
You do still have an EU license though. So are you doing business there?
JY: Sure, but it’s not where we are focused.
So where are you focused?
JY: I mean it’s really worldwide. Deriv is a global business today and we are seeing growth in a lot of parts of the world, so I wouldn’t say we are confined to a specific area or region.
You’ve both been doing this for a while now. Do you think this sort of strategy would have been possible a decade or 15 years ago? From my point of view, access to cheap smartphone handsets has made this industry much more accessible for emerging markets compared to a decade ago
RC: There’s definitely a lot of truth in that. A lot of people in developing countries would not have easy access to a computer or the internet in the past. Today you have 5G networks in developing countries that are better than in Europe or the US. These people that would have only been able to trade on a desktop previously can now do it on their phone.
I wouldn’t disagree but one point that Europe does have in its favour is ease of doing business. If I think of banking and payments in particular, a licensed entity in Europe is likely to have an easier time than someone doing business somewhere like Thailand or LATAM
JY: Absolutely and I think that’s one of the reasons we’ve seen some consolidation in the industry over the last few years. There are still lots of brokers but only a few big firms because if you want to get it right, you have to get a lot right – payment systems, KYC, compliance, regulations, customer service, there’s a lot you have to do. It’s like they say about the military – the infantry can win a battle but logistics wins the war.
On that point, in headcount terms, Deriv must now be one of the biggest companies in this industry. Lots of companies were founded 15 to 20 years ago but there are some clear outliers in terms of who has been able to grow a lot versus those that haven’t or have even fallen away and failed. If you look at your own business or even other large competitors, why do you think you were able to succeed where others may have failed or just not been able to scale to the same size?
JY: If you want to have a house that lasts a long time, you need to be able to withstand the storms. So if you are running a broker, you need solid operations, you need solid compliance, you need solid payments, accounting, audits, and so on, because if you don’t have them, there will be a storm and you’ll get wiped out.
When firms have failed it tends to be because they have not set up their operations in a robust and proper way. They might have regulatory issues, HR issues, accounting issues. So it’s like with start ups in any industry, you have people that don’t set up their operations, they go live and they end up being a flash in the pan. They tend to invest in sales and marketing but forget about everything else.
On the global front, you have offices here in Malaysia, in Dubai, in London, and Malta. But then you have others in some more unusual countries, like Rwanda, Paraguay, Vanuatu. How many people do you have in the Paraguay and Rwanda ones and what is the thinking behind these sorts of efforts?
JY: Our view is that you can recruit young talent almost anywhere in the world now. Young people in most places have good IT skills, they grew up in the digital age, they’ve often got a good degree.
RC: English-language skills in these places are also very good, so they can work globally. And they tend to be hungrier as well, they want to work hard and are looking for an opportunity to do that. Particularly in Asia over the last 10 – 20 years, I have seen firsthand the change in attitude. Asia is young, it’s confident, it’s optimistic.
This is quite a niche industry. So even if you have intelligent people, is it not difficult to hire the right people given you may be going somewhere with no background in the industry at all and so people simply have no familiarity with it?
JY: Not really because we take a long-term approach to it. We train them up and you grow slowly.
RC: We do not go to somewhere like Paraguay and just open an office with 90 people. You start with 5 then 10, then 20 and so on. So you train people up slowly, then they are able to train people themselves, and you grow organically. It takes time but there is no other way for it to work long term.
So how long did it take to get from 0 to over 100 people in Paraguay?
RC: Five years – we opened the office in 2019.
And are those people working across all the different roles – dealing, risk, compliance, account management, and so on?
RC: Yes
To go back to the prior question on some companies offering everything to be something like a ‘one stop shop’ for investing and trading, would you offer cash equities, for example?
JY: We have an R&D team, who are always looking at new products and new ways to improve our existing offering. There is no killer product in the works but we’re always looking at the opportunities that are out there. I mean my view is that AI is going to be a huge game changer in the years ahead.
Would you do prop?
JY: No, we decided against it, because there just looked like there would be too many problems with it. It’s way too crowded, it’s a mad rush, and it’s not just worth it for us getting into the fray.
RC: It’s not necessarily a bad product but it might go wrong on an industry level and end badly. Prop trading itself is a very interesting idea if done ethically, properly, and everything is set up nicely. But we said no because of what the industry looks like as a whole today.
On the AI point, can you elaborate on what you mean and are you actually using it internally for anything?
JY: I think it’s going to transform the whole world. It’s fundamentally job replacing and it’s also massively deflationary. We can end up in a position where the cost of goods and services is close to zero, so we could be in this age of abundance.
RC: I already see something like this when I go to India. Data and internet services are so cheap they are almost free. We could be in a position where energy is free. And so with AI, we could be in this position where you need almost nothing to live a relatively comfortable life. So I totally agree with JY, I think it’s going to be a game changer. It’s only the beginning.
On the work point, you started this company 25 years ago, presumably you could both stop working if you wanted to. Why don’t you do that? Couldn’t you be sitting on a beach in Vanuatu, sipping a cocktail, and leaving the stress of beating Exness to your successor?
RC: You need a challenge in life, you know, to keep yourself going. I also think you always have to keep learning new things. You will never reach the point where you don’t need that challenge or where you have nothing left to learn. So for me, I am not doing this because of the money, but because of the challenge and because of the fact that you are always having to learn new things and solve problems. I would just get bored and lose my mental edge if I didn’t do that.
A lot of people at smaller firms can be very pessimistic about the future of this industry, particularly in Europe. Is that something at all that concerns you?
JY: I think they are probably right to be pessimistic about western countries because in Europe you have a culture that has developed that simply does not allow risk taking. It’s not just in our industry, it is everywhere. Risk is considered a bad thing. We as an industry allow people to take risk and teach them how to structure that. It’s a controlled, risk-taking environment. This is actually a good thing because you are not just learning about trading, it has lessons on how to manage your life as a whole.