Last week eToro went public and so a lot of people in this industry have probably been focused on that. But at the same time as all that was going on, another broker also revealed plans to go public – iFOREX. The broker published a prospectus to list on the London Stock Exchange earlier this month.
And that prospectus is much more representative of what brokers are doing today. If you look at eToro, they have basically gone down the route that Trading 212 and a couple of others have. You say you are an investment platform, market stocks and crypto, then make most of your money from leveraged products. They also focus mainly on developed markets, like Europe, the UK, Australia, and Singapore.
The reality is most brokers aren’t doing that. Previously on TradeInformer we looked at the CFD industry in Cyprus and how many people it employs.
One of the pieces of information derived from that was the fact that only one of the 10 largest brokers in Cyprus, by headcount, does meaningful business in Europe. It’s all emerging markets and offshore licences. Moreover, almost none of those firms, whether it’s Exness or FXGT, offer anything beyond CFDs.
That being the case, I figured it would be fun to look at what iFOREX is doing because their operations provide a lot more insight into how most brokers today are operating.
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1. 95% of iFOREX revenue is offshore
Something that has often been opaque, given that most firms are not public, is how much revenue companies that retain a CySEC (or other EU) license do via that entity vs any offshore licences they have.
The answer in the case of iFOREX is 95%. The company has two regulated entities – one in the BVI and one in Cyprus.
Total revenue last year was $50.1m, meaning around $47.7m came from via the BVI and just $2.4m was derived from the CySEC license.
It’s worth noting that the company takes clients from non-EU European countries via its offshore entity, meaning a client from Switzerland, for example, would trade with the company’s BVI entity.
Based on the accounts of some companies I have seen who are in Cyprus, I would say this is broadly representative of what most firms are doing.
2. Japan was 35% of group revenues
As was reported last week on TradeInformer, iFOREX made $17.5m in Japan last year or 35% of total revenues.
This is also an interesting sign of how big reverse solicitation Japan actually is.
If you look at most of the big affiliate sites for the Japan market that refer clients to offshore firms, iFOREX is never there. Consequently, my reading of this is that if they are making that amount of money, then just think how much the big guys are doing in their place.
Also worth highlighting here is the fact that a quarter of group revenues came from affiliates and 60% of that amount was from Japan. Doing the maths, that means 14.4% of overall group revenues came from Japanese affiliates.
However, that also leaves you with an interesting question. If 14.4% of revenues came from Japan affiliates and 35% of overall revenues came from Japan, it means that the large majority of Japan revenues didn’t come from affiliates. So then where did they come from? Something for another article.
3. India was 17% of revenues
Also interesting was the fact that Indian clients generated 17% of revenues at iFOREX last year.
In real terms that means about $8.5m in sales.
Again, this to me is confirmation of the potential that India offers. I would not say iFOREX is one of the bigger players in the country and yet they are doing decent revenues there.
4. Jordan, Saudi, and the UAE were all top 5
Unfortunately iFOREX did not actually say how much it made from the countries in percentage terms but the broker said that after Japan and India, its largest markets were the UAE, Jordan, and Saudi Arabia.
The first of those two probably aren’t that surprising but the last one is more interesting. Saudi is a market that lots of brokers want to access but which is made more difficult by payments problems.
5. CAC was $418, ARPU was $1,737
One of the other interesting things about working in emerging markets is lower acquisition costs.
iFOREX paid $418 to acquire each client last year. That’s compared to $1,456 at Plus500.
Moreover, the average revenue per user (ARPU) was $1,737 or 4.2x the acquisition cost. Interestingly this is better than Plus500, where the ARPU – CAC was better ($1,567) but the multiple (2.1x) was worse.
You would then assume that the margins at iFOREX would be on par or even superior to those at Plus500. I actually think it may be the former but it’s hard to tell because of some ‘interesting’ accounting.
6. iFOREX wants to apply for a UAE license
Like pretty much every other broker, iFOREX says that if its IPO is successful it will apply to the regulator in the UAE for a license. Not much of a surprise here – lots of brokers are now using SCA’s Category 5 license as a way of marketing their services.
7. They had to withdraw three FCA license applications
One of the juicier bits of information in the document was the fact that iFOREX has applied three times to get an FCA license and then withdrawn it every time.
To be fair, the first two of these were in 2008 and 2010 – so quite a while ago. The most recent one was in 2016.
In each case, the regulator said it was ‘minded to refuse’ the application. This is a polite way of telling your firm to withdraw its application before it gets rejected. iFOREX also had a license in Andorra rejected in 2021 and again in 2022 on appeal.
8. iFOREX paid $17.6m in bonuses, $658,677 in rebates
Probably because I’m in the UK and don’t see bonus offers from brokers, and also I like to delude myself that marketing tactics don’t work on me, I don’t really think of bonuses that much or think of them as being effective.
However, clearly they are. iFOREX saw $17.6m in ‘realised’ client bonuses last year. The company also noted that when it reduced bonuses in a “key market”, volumes from that market fell and so did affiliate activity. I guess bonuses work!
9. iFOREX has paid out $262m to shareholders in the last decade
One of the ideas we’ve looked at before in TradeInformer is that it’s great to own a CFD broker but bad to be an investor in one.
The iFOREX accounts provide a simple example of this. From 2014 to 2024, the company paid out $262m to the company’s owners.
It’s unclear what valuation the company is seeking for its IPO but whether the firm would be able to see a sizeable increase in valuation is debatable. Meanwhile the owners probably don’t care as they have already made so much money from the business
10. iFOREX (genuinely) uses AI
The final point I found interesting is more random but it’s the use of AI. There is so much garbage out there about the efficacy or use of AI.
The reality is that people are using it, even if it’s not as groundbreaking as many make it out to be.
In the case of iFOREX, they say that…
The Group uses AI to perform tasks previously requiring human intelligence. In particular, the Group uses AI for the development of the business and to assist in writing routine code needed for its internal systems. The Group also uses generative AI for transcription, data enrichment and translation services, as well as to create images and videos for use in its advertising and promotional materials as well as facilitating communications with its clients as a form of client support on its website
One example of this that I am aware of, which is not in the report, is the use of a WhatsApp chatbot that the company created in-house.
I guess my overall point here is that, although it can be tempting to ignore AI hype as guff, there are companies actually using it in the real world. Believe (some of) the hype is the mantra to live by.
