The thing I like about driving in Cyprus is that you can go fast and you can dump your car wherever and you don’t get a ticket. It’s great.
This is also a big benefit when you are running late somewhere. You go there, leave your car on the pavement and then go inside.
The reason I bring this up is that last week I had to meet the Match-Trader team in Cyprus and was pressed for time. I showed up, found a random building site, left the car there, and then went into meet the Match-Trader crew. Simple.
Prop trading growth
Like other tech providers in the industry, Match-Trade Technologies – the company behind the Match-Trader platform – has seen a big rise in demand for prop trading products.
This industry is still in its early days but it’s a very fast-moving one, with constant demand for new tweaks and add-ons to the basic prop offering. That mirrors something we see in the broker space – the first to market with new products wins.
“We have to respond as fast as possible to new trends and client demands,” Alexis Droussiotis, Head of Match-Trader Platform, told me. “It’s not just about making our partners happy, it’s about making sure they have all the technology they need to thrive and keep their own client base happy.”
So what are those trends? Well, we ran through them point by point when we spoke, so I’ll do the same thing when writing about it.
- Trading tournaments
A growing trend in both the brokerage industry and prop space is to have trading tournaments. If you think this is low brow then keep in mind that IG Group was doing it. You also have companies like Profit.com, who seem to be making it the focal point of their business model.
In the prop space, as in the broker industry, the goal is to generate leads. Kind of like a challenge giveaway, by doing a free tournament, potentially with some sort of prize, you get people to sign up. You can then (hopefully) use those contact details to generate real business down the line.
“It’s a popular offering because it works,” said Droussiotis. “You get people in with a free offering and convert them in the future. We were quick to add this to Match-Trader and lots of props are coming to us for the offering.”
According to Droussiotis, the main problems props faced were on price and technology. With regard to the former, props did not want to pay a full ‘per account’ fee for the offering because it’s not being monetised immediately. On the technology side Match-Trader had to adjust its CRM so that it could facilitate the tournaments.
“We want to earn when our clients earn,” Droussiotis noted. “So we are happy to be accommodating with the account fees. The CRM had to be developed quickly but we now have a solid offering there too.”
- Add ons
One of the things about prop is that it’s a lot like an e-commerce product, rather than a brokerage deposit. And this allows for more ecommerce-y style marketing and sales efforts than you would probably be able to do if you were a broker.
One of these is add-ons. There are things in prop that feel like the kind of discount you get offered when ordering pizza online, mixed with techniques taken from the video game world. For example, props offer things like ‘health packs’ to someone that has breached a drawdown rule, which let them get back in the ‘game’.
Droussiotis says that these sorts of features are also among the most-requested from prop clients using Match-Trader. Alas, they wouldn’t give me the hard data but the impression I got was, yes, they do work.
However, from my point of view there is also potential for tension here. Brokers are accustomed to thinking in a very particular way. Does this mean they have to change how they do marketing when working on their props offering?
“It’s a totally different product from being a broker,” Match-Trade Technologies CEO Michał Karczewski told me. “You have a lot more leads, a lot more clients, a lot more accounts, a lot more clients going through your app. I would say it’s like doing a large-scale retail product. This is a big challenge for brokers actually, because I would say only the biggest brokers are used to having these kinds of client numbers. Most brokers are not used to handling and being able to optimise marketing and their platform at this scale.”
- Prop CRM
One of core parts of prop is its CRM and, again, this is quite different from the way it is structured with a broker.
According to the Match-Trader team, brokers often want to add a prop product but keep their existing CRM.
According to Droussiotis, the hard part of building such an offering is the backend logic and various calculations needed to manage the different components of a prop offering.
Consequently, the company has built an offering whereby a broker can set up with Match-Trader platform, then plug into the broker’s CRM provider. The CRM then only has to build two pages – challenge purchase page.
“We can get a company set up in a week,” said Droussiotis. “Match-Trader does the calculations and feeds the data through to the CRM. So there is integration work but it takes a small fraction of the time it would take to build a full prop solution. A broker already working with us would just have to add those two pages and then integrate the prop module. That’s it.”
- Scaling challenges
The final feature that the Match-Trader team said is in demand is in scaling challenges. What are these?
Imagine you passed a challenge, you got a funded account and you made a profit. Now you can withdraw that cash. Or you can take it and ‘scale’ your account, so you have the opportunity to earn a larger payout.
“If one prop has it, everyone wants it,” said Droussiotis. “That is what happened with this feature. It clicked and we had to move fast to be able to offer them to clients. Props are also taking different approaches with this, so we had to build a product where they can customise the scaling options based on the structure they want to run with.”
There is some similarity here between props and brokers. If you are a broker and have a bad day on the b-book, you can end up with a large liability. However, that liability is only ‘realised’ once the client decides to withdraw.
Speaking to one industry executive recently, who was previously on the trading firm at a large broker, he noted that they could have days with huge losses from market making. However, the actual amount they would end up ‘losing’ was often a fraction of that overall amount. Why? Because clients would often not withdraw. They’d keep trading.
The same logic applies to the scaling plan. A successful trader only crystalises a liability once they make a withdrawal. If they move on to the scaling plan, they don’t withdraw, unless they are successful in the next phase (and even then they might choose to scale again).
Prop is here to stay (and in its early days)
There are a couple of things that stuck with me after leaving Match-Trader HQ after that meeting.
One is that prop is big and here to stay. Match-Trade Technologies is seeing a lot of demand and that fits with other conversations I’ve had recently. That includes volumes and revenues from companies in the industry, as well as the number of different brokers, big and small, who are looking at the product.
Another factor is that it’s obvious we’re in early days. This is not quite a broker product – it’s more like e-commerce mixed with gaming. There are certainly people with those skills in this industry, but it could easily attract people from outside as well.
Trading knowledge or an understanding of financial markets is in some ways much less useful in this industry compared to at a brokerage, primarily because it doesn’t seem like anyone has figured out how to hedge exposure for props.