Forex trading gets competitive

TFI Markets is a financial services company that provides clients with access to Forex markets through an online trading platform called TFIFX. Where is the revolution in that, you might ask?

October 31, 2012

According to Charis Charilaou, the company’s Executive Director, the development of the electronic Forex trading platform reflects the evolution of the markets. “When I first started working in this industry, Forex trading used to be more of a bank game,” he says. “What changed that in the last years was the introduction of retail credit platforms which gave clients access to these markets. Some companies started introducing this at the start of the century and it has picked up in the last couple of years. We are now talking about volumes of a couple of trillion a day, which is huge, so it is a very liquid product. It is also 24-hours a day compared to other investments such as equities, and the big level of margin has made the product attractive to retail investors.”

“We don’t care about becoming the largest broker… our ambition is becoming the best global Forex broker”

Charilaou claims that if you compare the Forex performance in major currencies such as the US dollar against the euro with shares, Forex does not necessarily seem like an attractive investment to retail investors. “The USD moves on average between something like one percent a day, while shares can move 10 or 20 percent a day,” he says. “But what has made Forex much more attractive is the use of leverage. This means you can deposit, say, 100,000 and take a position for one million. This increases the potential profit. If you leverage by 10 and the currency moves one percent then you’ll make 10 percent instead of one percent. On the other hand, if it moves against you one percent you can lose 10 percent. Leverage makes the product both attractive and risky at the same time. Forex is the most liquid market in the world in terms of volume. It operates 24-hours a day and is virtually impossible to manipulate.”

Capitalising on cash
The TFIFX online platform uses the MetaTrader 4 of MetaQuotes systems. According to Charilaou over 200 companies around the world use this software. “It is very user-friendly,” he says. “In terms of our products, our Premium Account is our lead product. It was developed based on our experience from trading the Forex markets, and provides our clients with what we want to see when we trade.

The Premium Account has a fixed price model that is a very important characteristic of the product. It is difficult to find an offering for fixed prices above five million. In our case we have an offering for fixed prices for up to 20 million. We also provide Premium clients with services, giving them 24-hour access to our dealers who actually trade the markets. This means a client can pick up the phone and ask why the euro moved higher in the last two minutes. Our job here is to give educated answers, the reasons for any movement in the market. Premium is suitable for medium-to-large clients. It also provides everything else that we offer to our smaller clients such as 24-hour free news, emails with any market developments, and so on.”

The company’s product for smaller sized clients is the CashBack Account that Charilaou describes as revolutionary. “I believe this is very different from anything else that the market offers,” he says. “We offer this product to clients with an initial deposit of less than 10,000. The basic characteristic of CashBack is that every time a client trades with us on the platform electronically we pay back to him a fixed amount of our profit. So every time he trades we pay him something like a commission. So if a German importer buys goods or services from the US and needs to pay in US dollars, instead of buying dollars from a bank, he can do that from TFI and we send the dollars to his client in the US.” TFI currently operates with a proficient team of 30 people. The operation is composed of a handful of departments:
– Back office is in charge of confirmation of trades and opening of accounts;
– Compliance office is in control of verification of customer’s accounts and performing due diligence checks;
– Sales and customer support maintain  one-on-one contact with customers;
– The marketing team is responsible for brand awareness and the advertising of services;
– The IT department has the complex task of keeping up with ever-changing state of the art technology;
– Finally, the treasury department has full responsibility for producing reports and executing customer’s orders.

According to Charilaou, the company’s monthly volumes come close to a whopping $1bn. “Most of our clients are from Europe with both retail and corporate accounts,” he says. “We don’t have any US clients at present, but we do have some from Asia.”

Self-assured Charilaou summarises his company’s methodical success and outlines its ambitions: “We don’t care about becoming the largest broker… our ambition is becoming the best global Forex broker. We strive to keep a benchmark brand name and reputation for the company.”

Advantages to Forex
– High geographical dispersion;
– Plethora of factors affecting exchange rates;
– The largest asset class in the world leading to high liquidity;
– Low margins of relative profit compared with other markets of fixed income;
– The use of leverage to enhance profit and loss margins (with respect to account size);
– Continuous operation: 24-hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday.

Because of all these parameters and despite intervention by central banks, the forex market has been referred to as the market closest to perfect competition. According to the Bank for International Settlements, the average daily turnover in global Forex markets in 2010 was estimated at $3.98trn, a growth of approximately 20 percent over the $3.21trn daily volume in 2007.

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