LeapRate Interview… Last year, UK FCA regulated global provider of FX and CFD brokerage services Tickmill announced that it has ended 2018 by posting significant growth as evidenced by remarkable increases in all financial metrics. The company also teamed up with the NOK Triathlon team last summer.
Tickmill’s UK CEO, Duncan Anderson joins LeapRate today to let us know how successful 2019 was for the firm, as well as to discuss key trader demands, exchanges’ role in FX market evolution, and more.
Duncan Anderson has over 30 years of experience in the financial sector. He began his career at Morgan Grenfell, working on the Liffe Floor before moving to the LME and subsequently the CME.
On his return to London, he ran the US Equity desk of a large UK financial broker-dealer before managing the design, build and trading of CFD products for an international securities business. He then led the first Japanese retail broker to acquire an FCA UK licence, before joining Tickmill to develop their UK business.
LR: How successful was 2019 for Tickmill – what has changed, what would you like to leave behind?
Duncan: First of all, Tickmill continued its growth trajectory in 2019, expanding its business in all target markets. Our key focus in 2019 was the automation of various internal processes to increase efficiency and speed – as a result improving our excellent service to our clients.
We also spent a lot of time and resources in 2019 in preparation for the launch of some exciting new products and platforms in 2020. We’re looking forward to surprising the trading community in a few months’ time.
As it stands, Tickmill onboards its clients at our UK, Cyprus and Seychelles entities. In 2019 we obtained additional licenses in key geographic markets and will be making some exciting announcements concerning new licenses in 2020.
LR: There was a lot of turmoil in the Forex market last year, what do you think has affected business the most and how have brokers adapted?
Duncan: The biggest impact for brokers came from ESMA changes – putting a lot of pressure on brokers who were historically focused on Europe. Some of these brokers then started frantically building offshore business without proper experience or, moved their European clients to offshore entities. They then offered higher leverages, which is risky and a quite short-sighted solution.
Others went as far as to close their European entities or significantly reduce the clients that they accept, in turn increasing risk as most of their business is offshore.
We have always welcomed new initiatives from regulators within the financial industry, as service providers and most importantly clients, benefit from a safer trading environment. We also don’t engage with regulatory arbitrage – for example, we never onboard European clients to non-EU entities. Initially this impacted our European business as some clients chose to move to offshore brokers. However, we firmly believe that in time, EU regulators will move to support local brokers, encouraging clients to work in a safer and more secure environment.
LR: What were key trader demands in 2019?
Duncan: Clients’ interest in various social/copy trading solutions sky-rocketed! We also noted that there was a much larger demand for CFDs on major global stocks such as Apple, Amazon, Google and more.
Aside from more specified trends, we’ve noticed that Clients are much more knowledgeable – continually pushing for innovation and improvement in services across the entire industry. This has driven our focus to constantly innovate, deliver better service quality, more products and more platforms.
We’ve also moved to accommodate changing consumer behaviour. Traders are become more mobile, meaning that they are communicating and trading on the go. So, we’re adapting many procedures like client onboarding, relationship management, trading activity etc. to become mobile-focused.
LR: According to you, what has changed for the retail trading industry in 2019, and what to expect in 2020?
Duncan: The competitive landscape has evolved into a more organised state, as many brokers are unable to cope with a stricter regulatory global environment. Stricter regulation pressures profitability, so the trend in 2020 will likely be continuing consolidation of the industry. We believe that in 3-5 years’ time there will be 40-50 global players in the FX/CFD industry, making up 95% of the business.
We’re also seeing a large amount of unsustainable behaviour from other brokers, whereby they onboard European clients to non-EU regulated entities in order to offer higher leverage.
In addition, the 2018 crypto boom did not last long, with most of the industry in 2019 seeing minimal volumes in crypto related products. Tickmill stopped offering Bitcoin CFD trading in 2019 due to low interest from its clients and too much risk due to excessive volatility.
LR: What role will exchanges play in the evolution of the FX market?
Duncan: Exchanges are trying to lure retail traders away from the CFD industry towards the exchange traded products. They’re doing this by introducing products that are similar in size and characteristics to FX contracts. A good example is CME who introduced micro futures contracts in 2019 in order to bring more retail traders to the futures markets.
The push by the exchanges to introduce products for the retail FX/CFD traders means that competition will increase and also Futures brokers will become attractive to CFD traders due to micro contracts. Exchanges will also introduce more transparency and safety to the retail trading industry, pushing FX brokers to ‘up their game’ and focus on service quality, price and execution transparency – a great result for retail clients.
LR: What upcoming trends do you see emerging and making an impact on the industry in the next few years?
Duncan: Larger brokers like Tickmill are going to offer multiple asset classes and platforms to diversify revenue streams.
In terms of offshore jurisdictions, places like Seychelles, Mauritius, Labuan and Bahamas will solidify their positions as premier offshore jurisdictions for the retail FX industry.
Thanks to our size and reputation, Tickmill doesn’t face any issues with opening bank accounts at any major global banks. However, this isn’t the case with a lot of our competitors. Banks are already becoming more accustomed to working with medium and larger sized FX providers, making it almost impossible for new FX brokers to do so.
LR: What are your plans for the future? How do you plan to surprise your customers this year?
Duncan: We believe that the future of the industry lies with brokers who offer a multitude of asset classes and platform options. Our continual aim is to constantly provide good quality service through highly regulated and well-capitalized entities, under a brand with an excellent reputation. We endeavor to continue this through 2020 by introducing more products and more platforms with a focus on mobile as most of our core market clients rarely use desktop devices.
We’re also continuously looking at efficiency and automation in order to keep costs low while being able to serve an increasing number of clients.