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The 20th century oil baron Calouste Gulbenkian had a favourite phrase that he apparently used to say all the time to his family and business associates – “it urur, kervan yurur”.
The dogs bark, the caravan moves on.
A more ‘Diary of a CEO’ interpretation of this expression is to follow what people do, rather than what people say. For example, a lot of brokers say they hate WikiFX. And yet there they are with a paid promotion on WikiFX’s website.
There are many examples of this and it is what it is. Like Osgood says in ‘Some Like it Hot’ – nobody’s perfect.
The prop space has been an interesting example of this because so many people have dumped on it and then you find out they are looking to see if they can add it as a product in some way.
When we first reported that IC Markets was planning to launch a prop firm, some people literally didn’t believe us and then they ended up doing it.
Indeed, the reality today is there is almost no large firm on the market that has not at an absolute minimum been looking at adding prop.
Typically the problem is not prop per se but an inability to add it because of reputation reasons.
For example, if you are a listed company, you could theoretically offer prop but would probably find it extremely difficult to do so in practice. It’s kind of like crypto a decade or more ago – it’s new, unregulated, and seems to attract strangely fanatical retail clients.
This is not something that would look good to existing or prospective shareholders, plus it would attract heat from the public and regulators. IC Markets doesn’t have to worry about this stuff so they can do it.
Who will blink first?
Nonetheless, from speaking to several technology providers and consultants in the industry, it does feel like ‘something’ is bubbling beneath the surface.
Whether it’s one of the other major brokers, a gambling company, or someone else, lots of companies with deep pockets are clearly looking at this industry and trying to figure out a way they can get into it.
To draw an analogy, if you look back two decades ago, the mixture of Cyprus joining the European Union and the rise of the internet completely changed how the CFD industry operated.
As one senior executive at a broker in the UK told me a couple of weeks ago, Plus500 entering the market made other companies completely rethink how they worked with affiliates and digital marketing.
Similarly, ATFX Chief Strategy Officer and FXCM Founder Drew Niv wrote a blog post recently about how FXCM was the largest player in Japan from 1999 to 2009, before it got hit hard by the big internet companies, like Rakuten and – who could forget? – DMM entering the market.
Those companies had deep pockets and/or good tech. They were also slightly unusual compared to the rest of the world as they are huge conglomerates and already had a lot of traffic.
If you look at the ‘disruptors’ to the CFD industry, it seems like IQ Option is the only one that entered the prop sector. But to be honest, their product isn’t that amazing and I don’t get the impression they are knocking it out of the park.
The main thing for me is that I don’t think anyone has come to market yet with a very simple product.
If you look at the success of companies like Plus500, Capital.com, or Skilling, over the last decade or so, it is typically predicated on two things.
- They are really good at digital marketing for mobile
- They made it very simple to use and access their product
In my opinion no one did an amazing job of that yet in the prop space. This is something Anton Sokolov from Brokeree wrote about almost a year ago with regard to challenges, and I don’t think much changed in the intervening period.
Who will the disruptor be?
I don’t know. As Drew wrote in his post, disruption tends to come out of left field. How many people predicted that prop itself would be as big as it is, for example?
Whatever the case, when you have an industry that means you can make the sort of margins and money at speed that prop allows you to, other people get attracted to it. We’ll have to wait and see who they are.
