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Hi friends – this week we’re kicking off with partner content from Spotware – the team behind cTrader.
Spotware will be attending Finance Magnates London Summit 2024 (FMLS24) this week as a Premium Branding Sponsor. Book a meeting with our team, available throughout the event!
On 18-20 November, the Old Billingsgate in London will become the meeting ground for everyone who’s anyone in the trading industry. It’s a can’t-miss opportunity to connect with leaders and innovators shaping the fintech world – and the perfect chance to book a meeting with the Spotware team.
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Why Meet With Us?
At Spotware, our mission is to empower brokers and prop firms to succeed by providing trusted, end-to-end solutions that millions of traders worldwide rely on. Our flagship platform, cTrader, stands out for its innovation, reliability, and extensive customisation options, offering a comprehensive solution for FX/CFD businesses of all sizes. By bringing the premium, feature-rich, and high-performing trading platform to mobile users, Spotware meets the demands of today’s fast-paced, mobile-first world.
Whether you’re looking to expand your brokerage or prop service offerings, find the best-fit trading platform, or simply learn more about our mobile trading solutions, we’re ready to explore how cTrader can help meet your specific goals. Chat to our team and get an insider’s view of how our cutting-edge solutions can provide flexibility, scalability, and premium trading experiences for your clients.
Major Platform Update: cTrader 5.0
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See You There!
Meet with Spotware and see how cTrader’s enhanced IB tools, seamless UI/UX, and advanced algorithm features can elevate your brokerage’s offerings and keep you at the forefront of the trading industry. Let’s shape the future together at FMLS24. Book your meeting with Yiannis Televantides, Sales Manager or Tarek Abdullah, Business Advisor now and see you in London!
ATFX is on a hiring spree – read about it here
European regulators are dorks
One of my favourite company stories is Bet365. The owner of the firm – Denise Coates – is intelligent, hard working, and built a successful business, so naturally she is a widely maligned figure in the UK.
Part of the reason Coates has become so wealthy, and I like the Bet365 story, is that she continues to own the majority of the betting group. That is because no VCs would give her cash, meaning she had to borrow loads of money to start the company. Consequently no outside investors own any equity in the business. When you hear that she is the ‘best paid person in the UK’ that is the reason.
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Something else I have wondered is whether the company would be as successful today were it not for the US banning online gaming in 2006. Had Silicon Valley got involved 20 years ago, would they have swamped a then-small UK firm based in Stoke?
‘What ifs?’ like this are obviously hard to answer. What is plausible is that the US ban acted, albeit inadvertently, like a reverse protectionist measure. By banning online gambling, the US protected non-US companies from American competition.
Protectionism is in the news a lot at the moment but it’s hardly a novel phenomenon. Most East Asian countries have a long history of protectionism to shield nascent industries. Japan, South Korea, Taiwan, and China have all done this to develop various favoured sectors, like electronics and auto manufacturing, usually alongside keeping currencies artificially undervalued to prop up exports.
More recently, China banned US tech companies from entering the local market. Local alternatives, like Weibo and WeChat, have sprung up in their place. Russia took less extreme steps to protect Yandex, which arguably had divisions that were as good or superior to their Google equivalents. Israel also does stuff like this regularly, like banning Uber and other ride hailing apps to protect Gett. Even in our industry, Plus500 has in part been able to deliver such high levels of net income because it operates under a tax regime that is designed solely for technology businesses.
Then you have the US, a country which purports to be open and pro free trade but, as we’ve seen recently, is pro free trade so long as free trade works for them. They were happy for their tech firms to be predominant but when TikTok started to take market share, they began to threaten to ban it, just like China did to their tech firms. Now they have imposed 100% tariffs on Chinese EVs because they want to protect their own car companies from cheaper competition. Such is life.
What does this have to do with this industry? Last week we looked at ForecastEx and event contracts. ForecastEx is operated by Interactive Brokers. Its main competitors are Polymarket and Kalshi. The CME also offers event contracts.
ForecastEx and Kalshi are both up and running with US regulatory approval, as are the CME’s operations. Polymarket is backed by Peter Thiel, among others, and Kalshi has investment from Sequoia Capital and Charles Schwab (the man, not the company).
In short, these companies are not going away and you can guarantee that Polymarket, even if it has to pay some sort of fine today, will get approval in some shape or form tomorrow. The result is that you have a new speculative derivatives market that will be dominated by US firms. And you can guarantee that they are going to try and enter the European market.
What is so frustrating about this? There are companies in Europe in our industry, who could probably add these products very quickly if they wanted to. Note that I include the UK as part of Europe.
Unfortunately I fear the regulator(s) will at best make it annoying to do so and at worst just ban them. And guess what? Although US Navy SEALs will break down your door and ship you back to Washington for trial if you even consider onboarding one of their citizens, US regulators don’t care if their companies onboard you as one. Anyone that does want to trade these will probably just end up signing up with a US firm as a result.
Our industry is thus a microcosm for a wider reality in which European regulators don’t just make no effort to foster innovation or help local companies grow, they actively work against them by putting rules in place to stymie their progress or even ban them outright from doing anything. Meanwhile US and Chinese firms, who actually get support from their governments, will ride in and do whatever they want, and then the regulators here won’t do anything to stop them.
Beyond losing event contracts, the increasing restrictions on CFDs and commensurate growth in the marketing of ETDs like options and futures will have the same result. People that would have traded CFDs instead send revenues back overseas to the US, as they have already been doing in the stock market for about 15 years. Even more money leaves Europe as a result.
The only regulator in Europe that seems to have taken some measures against this is the Polish one. They almost certainly understood that it’s nice to have a locally successful company (XTB) and so took steps to support them.
You would have thought that CySEC would do something similar, given this industry’s role in the local economy is exponentially larger than it is in Poland. Alas. The result? Nine of the ten largest firms in Cyprus by employee count don’t do business in Europe anymore.
If you think this doesn’t matter then look at the fact that IC Markets – completely rationally – appears to be trying to divest from Cyprus. If they are successful in doing so then Cyprus loses corporate tax, income tax, and all the other financial benefits you accrue from having businesses based in your country. Incidentally, I am now aware of up to five company UBOs / CEOs who are moving from Cyprus to Dubai.
Readers may think this is a dumb thing to be annoyed about and point out that, in the grand scheme of things, online trading is but a small speck of light in the night sky that is the European economy.
The problem is that this is indicative of behaviour we see everywhere across the continent, with no attempt to support local business or entrepreneurialism, and where any level of risk is perceived as heresy. No two things better exemplify this in the UK than the utter failure to protect Arm and the truly awful ‘consumer duty’ regulations. French president Emmanuel Macron alluded to this state of affairs recently at an event in Hungary.
“For me, it’s simple,” he said. “The world is made up of herbivores and carnivores. If we decide to remain herbivores, then the carnivores will win and we will be a market for them.”
Italian Prime Minister Giorgia Meloni was tapping into a similar vein when she paraphrased John F. Kennedy at the same event.
“Ask not what the US can do for Europe but what Europe can do for itself,” she quipped.
The butt end of the financial services industry might seem like an odd place to start.
But you have to start somewhere.
Axi’s stockbroking acquisition
Followers of the much vaunted TradeInformer WhatsApp Channel will have seen a brief analysis of the Axi deal which was announced last week.
For those of you who missed this, Axi bid AUD $53m ($34.3m) to buy SelfWealth – a publicly traded Aussie stockbroker. To make life easier, I’ll quote the rest of the details in USD.
If you look at the deal, SelfWealth has 128,700 clients and around $7bn in total AUM. The average account size is thus around $54,700.
The company has no debt and $7.4m in cash. Assuming cash holdings are part of the transaction, this would mean the ‘real’ acquisition price is $26.9m.
Is this a good deal?
If you think about this purely in client terms, Axi is paying $26.9m to acquire 128,700 clients. This works out to be an average client acquisition cost of $209 for a 100% Aussie client base. This seems like a pretty ok deal to me.
Then you have to factor in the other parts of the business. The average account size is far higher than most ‘neobroker’-style companies.
For example, Trading 212’s website says it has 3m lifetime funded accounts and £3.5bn in client assets. This works out to be £1,500 per account.
SelfWealth’s numbers are more in line with IG Group. IG had 86,900 active clients for its stockbroking business last year, with AUM of £3.9bn. This implies an average account size of £44,879 ($56,628).
We spoke to Axi’s CEO earlier this year and he noted that the company was looking at expanding into other products, including cash equities. Beyond the above, acquiring SelfWealth would presumably make this process much simpler, given that the latter company already has the infrastructure in place to facilitate stock trading.