Improve your platform and get more volume with cTrader plugins
There is a certain point you get to after several days of hangovers and little sleep. You’re on your fourth Keo and third Marlboro Red, looking out onto a syrupy orange sky hanging over the Eastern Mediterranean, with half-naked women dancing to eurotrash techno on the beach, and you do start to look around and think to yourself…this is great, can Paytech put one of these events on every week?
Alas, they can’t and I would probably end up having a heart attack if they did. But what this is a roundabout way of saying is that iFX was pretty fun last week in Cyprus and as many people don’t often or ever make it to the country’s heralded shores, it’s a good opportunity to provide some info on what’s going on there.
1. Lots of props
One notable point for me was just how many props were at the event. The first iFX I went to was six years ago and there were zero at that point. It is wild to see how in the space of a couple of years, some props have become bigger than many brokers.
There isn’t much new here. Props are still having to deal with abusers and the ‘risk’ of huge payouts. No one seems to have a comprehensive system in place to deal with these problems.
The other factor is more related to marketing and attitude. Props really look and feel like a millennial or gen Z product, which isn’t surprising when you think that their founders are typically under 30.
Brokers still have something like a corporate approach to marketing. They want to be seen as ‘legit’ financial institutions. Props are a lot more casual and approach marketing in a way that’s more personality based. To use a comparison, podcasts have succeeded in part because they feel genuine to the audience, regardless of whether or not they are. Props approach marketing in a similar way.
One other point I’d make here is the sense of optimism. Brokers seem burdened by high competition and increasing regulatory pressures, both of which lead to higher costs. You don’t speak to brokers and get the feeling that there is loads of growth on the table. In contrast, props seem much more upbeat about doing business, growth, and the future of their industry.
Get a Match-Trader server today
2. Cyprus is still a key hub but it could flatline
Something that was noticeable from conversations with new or early stage brokers is how Cyprus is no longer a default place to get a license. Today it’s the Seychelles and Mauritius. This has been true for a few years now.
The result is that the main thing that made Cyprus a hub for CFD brokers – passporting across Europe – is no longer relevant. Several people I spoke to commented that the Dubai iFX is now ‘the’ event, when in the past it was Cyprus. The general sentiment was that Dubai is basically the main hub for the CFD industry today.
Will that be bad for Cyprus? It’s hard to tell but I would say the industry has reached a kind of critical mass where you have a huge amount of human capital that will be hard to remove.
Explore the DXtrade trading platform
If you are in the UK, Singapore, Australia, or even Dubai, it’s hard to impress upon you how big the industry is in Cyprus relative to almost anywhere else. In London, for example, CFDs are a small part of a far larger financial services industry. In contrast, if you drive into Limassol, you can easily spot 10 to 20 massive company logos, glued on to office buildings or billboards, without even trying.
Even though companies now do almost all business offshore, firms like Exness, XM, FXGT, and FxPro are still massive employers and don’t seem to have any intention of relocating staff elsewhere. Moreover, one broker I spoke to said Dubai firms are having to offer huge markups to salaries to get people to move because they cannot find the requisite talent locally.
Overall I would not say Cyprus is at risk but it’s definitely not a positive that so many firms no longer want or need to be regulated there. In the past, companies had to be there for legal reasons. Now it’s for the employees.
If ESMA hadn’t happened, would we have seen the Dubai surge? It’s impossible to say but perhaps it would be less pronounced than it has been.
Start using Centroid to manage your broker’s risk
3. Crypto companies
Another common conversation topic was about crypto companies. Firstly, two senior execs I am aware of are either moving or have moved over to crypto companies. In the UK it seems like Crypto.com is basically hiring the entire IG Group marketing team so maybe that shouldn’t be a surprise.
The general ‘thing’ here is a sense that these companies are going to come in with deep pockets, huge existing client bases, and high risk tolerance. The result may be them taking over a chunk of the CFD market. I am not so sure about that but it’s definitely something on broker execs’ minds.
4. UK not cooked?
Something that also surprised me during the visit was how people are still interested in taking on the UK market. Two big brands are planning on doing a lot more activity in the country over the next 12 months. Another two firms are in the process of getting a license or acquiring an entity to get one.
Personally I think this is crazy and I would just do offshore. But then maybe it’s also a sign that the UK is not so terrible for business as the doom and gloom suggests it is.
5. Broker paradox
The final observation I’d make is the omnipresent paradox of the industry. For brokers, it feels like competition and barriers to entry are making life harder and harder. But at the same time, you constantly see new players coming to market or meet people wanting to start a brand.
Something that I do find interesting here is how many small players there are out there in the ether who are doing so much better than you might expect. There are random brokers with no license that are making $10s of millions annually in revenue. Alternatively, you have small players who might not be making the same amount but who are still doing consistently well, with only a handful of employees, every year.
There is always talk about contraction in the industry and yet it doesn’t seem to happen.
What I think could take place is that you have a situation where there are very few medium-sized players remaining. Instead you are left with the big guys and a lot of small companies that have some sort of niche, like IB relationships or good local knowledge, that means they can keep making money.
