Game changers issue #2

Diamonds are Forever Interview with Ludovic Vuillier

Blast Off! Interview with Jonathan Baumgart

Operating at the Sharp End Interview with Andrea Peratitis

Help! My Marketing Department is Bankrupting Me! Ask the Experts

VOLUME 1 | ISSUE #2

DIRECTORY Blast Off!

2-5

Interview with Jonathan Baumgart

Diamonds are Forever

6-10

Interview with Ludovic Vuillier

Ask the Experts

11-13

Help! My Marketing Department is Bankruting Me!

Operating at the Sharp End Interview with Andrea Peratitis

14-17

BLAST OFF! THE INCREDIBLE RISE OF JONATHAN BAUMGART

Jonathan Baumgart is known as the go to FX consultant within the institutional & retail sphere. Having worked with him closely on many projects, we thought it would be great to get an insight into his thoughts and the future plans for Atomiq Consulting.

With an enviable pedigree of having learnt his craft at FXCM and later refining his skills at Boston Technologies, Jonathan has become one of the top voices when discussing the future direction of our industry.

In my opinion finding a solid and reputable FX consultant can be a Q challenge.

In a few words, what should we know about your IT Consultation services?

I’d like to explain how this type of need arises. It can be a challenge A Toandstart, rather difficult to find an in-house specialist, who requires no training in a short period of time. Our solution is lucrative as our team requires minimal training and can begin working with clients on day 1.

Following this theme, I think experience comes next. It is incredibly important to know how much experience a team has under its belt, and how many brokerages they have worked with or currently work for. Also if they can show evidence of a solid track record along with referrals then that is even better.

Additionally it is important to know what level of service can be offered. From my experience there are varying levels, do they understand how to analyze FIX logs, configure bridges and plugins or is the knowledge only limited to the sphere of MT4? Our team offers a complete solution as we are familiar not just with MT4 but all aspects of the broker ecosystem. can you add value to a brokerage. Be it either a start-up or an Q How established name?

In my view I think sales is often looked at a lot more than good service. I would bet that in a large proportion of brokers, many improvements can be made to

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the customer experience. From what I have found as a general rule, it is far easier to upsell an existing client than it is to get a new one. So logic would suggest to me that it is best to ensure existing clients are happy, rather than only focusing on new sales.

Additionally, there is a big segment of the market that is interested in signals or in some type of managed product where the client are not taking the decisions themselves. I feel that all brokers can get a larger slice of the markets potential by targeting traders /investors. What I mean by this is that some like the opportunities that FX offers but either need more time or do not trust themselves to trade, so they very quickly leave the market after the initial lack of success. They could be a long term customer with the right product such as an EA etc.

Q What is your opinion of MT5? clear to me based upon the communications they relayed at the London A It’s Magnates summit in November that Metaquotes will be making strong push in the way of MT5 this year.

I think MT5 is a good fit for what is now a more realistic offering to brokers, which includes not just FX but other products like metals energies and commodities that fall under the CFD umbrella.

MT5 is much better suited to support this type of multi-faceted product offering, and although MT4 will still be around, I would advise brokers to have a look at MT5 because of Metaquotes making a commitment to push forward the platform.

We can begin seeing many brokers start to adapt it. Therefore it is always good to be ahead of the curve and not be caught behind. Moreover, demand for MT4 is not going away, but from what I have seen more industry participants are considering MT5.

Q When should an IB or white label consider a full MT4 license? from a white label to a full license is a very big leap due to the A Jumping increased costs you will experience at the start of owning a brokerage.

For example a broker must consider bridge fees, technology such as hosting,

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support fees, liquidity and possibly plug-ins as well as additional staff to monitor and service the software.

From my experience it will only be good to take this jump if the current revenues are well in excess if not double all existing business costs.

There are two variables that one must consider. First, is the target region of the broker. Because some deposit sizes tend to be higher depending on which areas of the world the broker is targeting.

Secondly, it is good to have a solid base of revenue as one cannot always hope for market volatility that drives the numbers. During slower periods it is good to have some reserves of capital, as revenues are very much dependent on how active or volatile the market is.

Costs go up quite significantly compared to a white label. Monthly volume should be consistently profitable before taking the plunge.

Q What are your thoughts on the future of FX trading? concept of FX trading is more inherent to the world than stocks are, as A The most people in this world have to exchange money as a part of everyday life. Therefore they can connect the dots much quicker, and for this reason I do not feel that FX trading will ever go away.

Regulatory changes tend to impact the market the most, and as a consultant I am in an excellent position to outline to brokers on how these types of changes can impact their business. This does not only cover changes from regulatory bodies, but also bank accounts and payment solution providers which are also as equally as important.

We are living in incredibly volatile times. Between Brexit, a record high stock market in the US, a new US President and structural problems within the EU, markets should be turbulent in the foreseeable future.

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DIAMONDS ARE FOREVER

I have two hats when it comes to business and at times they’ve coincided. I am a salesperson at heart! That is who I am at my core. The rest is fluff. As part of that I was introduced to the world of forex when it was still in the beginning of expanding from an institutional market to a retail market. I grew up with this business.

I saw it go from semi-institutionalized where setting up a white label would cost you 25K and opening an account a minimum of 2500 USD if really you looked far and wide to a white label costing 5K and opening an account can be done for 100 USD. Seeing this change has been exciting and finding where the best place for me to be at each stage of these changes has been really interesting.

I have been an IB to brokers, an IB to fund managers, I’ve hired and trained sales teams and I’ve also provided brokers with leads. I love this industry except for the few days I hate it, as any good relationship goes I’m told. I still work with sales teams and leads. Though I’ve changed the way I work to be in the trenches just for the build up and then to take a broader look and work in an advisory role.

Q What is the back story to your company?

I do something, I like doing it big. If I’m going to be like everyone A When else it doesn’t interest me. Not because I don’t think it’s meaningful work but because I’m so lazy I prefer to be very efficient in my work so I can go back to the beach, the sailboat and the birds. Why do I say this. I have been offered partnerships in brokerage firms and various other businesses in the industry, but my thought always was that it’s not what I truly want to do. Knowing that this industry is always looking for the next big thing, I kept my eyes and ears open and my brain working for new ideas. I saw the industry try to renew itself with binary options and I’ll admit that was very successful.

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Some time ago I heard about lottery platforms - I did have an interest in that but due to certain experiences I had had in the past, it would have been closure for me. As an aside, due to various connections in Africa and Dubai, I have always been close to certain diamantaires though it is not something I actively participate in. But the world was known to me. I loved the fact that in this day and age where you can sign something digitally for someone halfway around the world and do everything without ever meeting with anyone face to face, this was one gigantic industry that not only still did business old-school style but did it based on a handshake a short phrase in Yiddish. As someone who values loyalty above all else, the fact that hundreds of millions of dollars were being traded purely on a handshake was something I wanted to be a part of one way or another.

One day, almost a year ago, I was introduced to the Singapore Diamond Exchange. They were doing something new. They were asking their members to display their inventory on the exchange so that other sellers/ buyers could see and buy/ sell with them via the platform they had built. The diamond industry was making a huge leap forward! I was asked if I could somehow connect such a platform to FX brokers. This was the turning point. I made a list of what the challenges were in connecting such a platform to retail FX brokers and I realized that I could solve all of these challenges. That was the beginning of Live Rates Feeds.

Q Why is it so different. Why should I take this now, if you want to trade diamonds online, you have to sign up with A Right a specific platform for diamonds whether integrated with an exchange (which usually requires you to be an accredited investor, not something the typical FX retail client is) or not, and buy and sell actual diamonds. So 1) the liquidity is very limited 2) you have to understand the difference between all of the different types of diamonds to know which you should buy 3) you have to sign up with an additional platform.

With us, the price feed is integrated into already existing platforms, we have created an easy index for diamonds and have a few more under development, so this will grow. Since this is a derivative you are speculating on the price movement, meaning the volatility and volume can very easily grow compared to having to trade in the specific physical commodity and this also means it is

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much easier to learn the price movements of one index compared to learning about each different type of diamond.

Q Can you give us the back story on the diamond market as you interpret it?

I mentioned in a previous question, the diamond market is very much A Asold-school.

Additionally, it’s an oligopoly. The reason for that is because of the eternal phrase “A diamond is forever” for which we can thank DeBeers. For something to be a good tradable commodity there has to be a secondary market created by people reselling what they bought. But here’s the catch. A diamond is forever means that your love is forever, that’s brilliant marketing since who in their right mind will try to resell the diamond they bought as a symbol of eternal love when they first got together with their spouse. You are allowed to buy more diamonds but you can never resell them, unless you want to sleep on the couch for the rest of your life. So what has changed? The economy LUDOVIC VUILLIER RATESFX is changing. People are looking CEO DIAMOND FEED to alternative investments for their wealth preservation. Bitcoin is a digital currency created fairly recently which many people use as an alternative investment to their cash savings. Some wealthier folks purchase and store actual gold bars so that even in the event of a worldwide banking collapse they still have those gold bars. Precious stones have always been an easy way to transport huge wealth easily from one place to another since a small stone can have a very high value and can be resold anywhere. Until now this was only used by the uber-wealthy however, in recent years there’s been a small movement of regular people looking to invest in precious stones not for the sake of love but for the sake of wealth. This small movement which has been growing in size is what’s given us the beginnings of a secondary market.

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Q Who is your target market? would love to say that starting from day one we intend to target the major A Iplayers and exchanges. But it wouldn’t be smart. The volume has to be built up from the ground. Retail traders have to start trading and everything needs to move forward and up from there. So at first, we are targeting the retail brokers and their traders. We intend to spend a fair amount of time targeting this market to make sure we have a strong and stable base of trading volume.

After we have that, I’ll sail around to the major player’s offices and get us in there too.

Q How easy is this to implement to the brokerage?

From day one I told my tech guy that I’d rather he work hard A Sothanso theso easy. clients. Not because I’m a nice guy but because if it’s not easy to implement, no matter how great the product is it just won’t be implemented.

We are in discussions with bridge providers which will make it a question of point and click for most brokers to be able to add this to their feed. As far as other platforms, it takes some hours of manpower but we built it in such a way that it easily and reliable connects to any financial trading platform.

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ASK

THE EXPERTS

By Paul Orford

Help! My marketing department is bankrupting me!

My marketing department spends large amounts on what they call ‘branding’.

Q What I find most frustrating is that it cannot be quantified or measured in anyway unlike sales. What can I do? understand the frustrations of brokerage owners having to fund what A Isome see as the marketing departments latest whims. However if done correctly branding can be a very effective tool for positioning yourself in the market, and setting the narrative in which the customer views you. There are many incredibly cost effective ways in which you can do this.

One way is to contact news providers such as Finance Feeds, Leap Rate or Finance Magnates and become an opinion maker. Thus making both yourself and by default the brokerage appear to be knowledgeable and trustworthy.

From my experience both the news providers and viewers do not like the usual bland PR pieces, so make sure your content is relevant, personal and engaging.

Another is social media which is easy to fall into the trap of buying very expensive add space on say Facebook, or spamming banal information across the world wide web.

Again from my personal experience if you are offering informative and useful information, not just the usual ‘here’s my market thoughts’ or one of the many copy and paste articles there are out there people will engage with you.

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Quality content has now become king, and there are so many fantastic and cost effective mediums to produce and deliver your message. Even You Tube can offer a great way as the end user in many ways will accept that you do not have a Hollywood quality budget and production techniques.

Finally, one of my favorites is the massively underused podcast. This can give the end user a good insight into the personalities of people who work at your institution. As long as they offer a coherent message then this should also be implemented.

The key thing is the age old adage ‘people buy from people’ so keep that in mind and get the personality of your people across rather than sponsoring a football team.

Don’t be scared to experiment as there are way too many cut and paste brokerages out there. You will not stand a chance if you are one of the sheep. Be a wolf and experiment, people will respect you!

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Operating at the Sharp End

Point Nine was founded in 2002 and offers post-trade processing outsourcing services to financial firms and corporations.

Our operations team, combined with our internally developed web-based technology, called Circle, help our clients to complement their existing middle and back office operations or even become their complete one-stop middle and back office solution.

Our regulatory reporting team is involved in EMIR, FinfraG, MiFID, MiFIR and ASIC but our technology platform caters for all derivative transaction reporting such as G20 derivatives reporting and the upcoming SFTR.

Q Who uses your services?

Our customers are primarily banks, asset managers, funds, retail institutional A brokers and corporates mainly in Europe and few in G20 countries. We currently process more than 50 million trades per month for various types of customers.

Q How are you different from your competitors? opinion is the technology, Circle, that distinguishes Point Nine. We A Inonlymyhave one system where we input the data and thus all the reports are driven from the same data-set, guaranteeing consistency. Our system is accessible over the web, so no local installations are required. All you need is a password and you can access it from your computer, tablet and phone. There is also full audit trail. This means that any change is audited and logged and you may see at any time what has been changed, when and by whom. Finally, Point Nine has built interfaces with most of the major prime brokers and custodians, , trade repositories and data warehouses and other third parties to disseminate trade information and for automatic reconciliation purposes. Therefore, this means that our new customers can go live easier and with less effort from their side and both the actual operational overhead and the chance of something going wrong are minimised.

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Another strong point of Point Nine is our regulatory reporting services. We offer a heavy enrichment of raw data to produce the various reports. We have real-time connectivity to all market participants and our automated solution is adjustable to our clients internal and external data sources and offers validations and matching of data before generating the final report and submitting it to the Trade Repository or ARM, UTI management and exception management. These are a small sample of what Point Nine does as far as regulatory reporting.

What are the key factors driving the demand for outsourcing middle and back office operations?

As mentioned earlier, there are two functions that may be outsourced: middle and back office operations in general and regulatory reporting. In both cases the reasoning of outsourcing is the same: cost efficiency, speed of processing and accuracy.

In the case of fund managers for example, for them to keep up with the increasingly competitive market, they need to expand the volume of trading and the range and complexity of products that they trade in. This means investment in both time and money, experienced professionals need to be hired, office space may need to be expanded, and an upgrade or even a complete overhaul of the systems and IT infrastructure may be required.

ANDREA PERATITIS Head of Regulatory Reporting

The same implications would occur in a regulated firm. For the firm to keep up with the numerous, upcoming regulatory frameworks that continuously change, they need to automate the processes and keep on upgrading accordingly to the speed of the regulatory changes. By outsourcing the reporting part, their professionals have time to focus on the legal/compliance aspects of the regulation. So, outsourcing regulatory reporting simultaneously increases their operating efficiencies and cost-savings.

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there been significant shift in the expectations of outsourcing middle Q Has and back office services over the last year? If yes, then how, and do you expect it to change in the future?

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the last year, there has been a significant increase for our regulatory A Over reporting services and we had a faster client intake and more inquiries into our services positioned by prospective clients than ever before. I personally see this trend to continue as more and more regulations are coming into force and regulators are requiring more and more reports to be submitted.

You have an enviable institutional client base. Why do you think that they use your service?

Point Nine is considered a blue chip provider as we are one of the biggest, if not the biggest, provider of EMIR data to one of the Trade Repositories. Therefore, it’s easier to attract institutional clients.

Q What are the plans for the future? plan is to continue growing and continue to offer high-standard A The services to our existing and potential customers. From regulatory reporting side, we are considering all the upcoming regulations not only in Europe but also globally. In other words, our aim is to become a one-stop solution for multi-jurisdictional transaction reporting like EMIR, MiFID II and MiFIR, ASIC, MAS and others, covering all asset classes and all types of clients.

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FinancialFinancial ServicesServices & Technology & Technology

5050

6565

Million Million Trades/Month Trades/Month

Custome Customers rs

EMIREMIR - ASIC - FinfraG - ASIC - FinfraG SFTRSFTR - MiFIR - MAS - MiFIR - MAS Middle Office

Middle Office

RegulatoryRegulatory Reporting Reporting

Circle Platform Circle Platform

Technology Technology

Managed Managed Services Services

www.p9ft.com - info@p9ft.com www.p9ft.com - info@p9ft.com

The Journal for Industry Leaders

FEBRUARY 2017