Exclusive: Mathieu Ghanem of ADSS on rebrand, ESMA changes, crypto trading, and more

Mathieu Ghanem ADSS

LeapRate Exclusive Interview… There has been a lot of change swirling lately at global broker ADSS – a rebranding of the company from ADS Securities, senior management changes, preparing for ESMA, and dealing with a new cryptocurrency trading clientele.

We are very pleased to speak today with Mathieu Ghanem, Managing Director, Global Head of Sales and Marketing at ADSS on these issues and more. Here is what he had to say.

LR: Hi Mathieu. The past few months seem to have been very busy at ADSS with a number of senior level hires in several locations – plus the rebrand to ADSS. We’re curious about the rebrand, and how you decided to go with ADSS.

Mathieu: We see this more as an evolution of the brand rather than a complete change, like any company or person we are growing and evolving. The initial positioning of ADS Securities was important in helping establish our business, however as we move to the next stage in our business cycle and development we felt the need to make these subtle changes to continue the growth and increase the reach and accessibility of our brand.

ADSS new logo rebrandWe now need a modern and youthful look, which speaks to a broader audience and can connect to traders who might have overlooked us before. We are also looking to promote the values that are important to us as a business, becoming visibly more client-centric and transparent in our dealings with our customers.

The term ‘Securities’ has been dropped because it is no longer regularly used across financial services. People don’t trade ‘securities’ they trade shares or equities and for ourselves as a multi-asset class derivatives broker we felt this needed to change. Our name remains the same, Abu Dhabi Sources Securities, but we will now be known as ADSS across our businesses.

As you mention we have made a number of key additions to our team, as we continue to strengthen our business and position the business well for further growth. Along with the rebranding and the continued investment in our own technology means it is an incredibly exciting time for ADSS.

LR: This past week contained one of the most important deadlines in recent memory for the Retail FX sector – August 1, when ESMA’s changes kicked in regarding leverage and advertising. How has ADSS prepared for August 1?

Mathieu: ADSS has prepared for the changes by applying for and gaining a EUR730k type license.  The key driver of this move was to address regulatory and client concerns around the implications of zero balance protection for brokers. The zero balance protection retail clients will now receive could potentially force firms, who only have a EUR125k license, into a position of taking on market risk which exceeds their license and permissions. The benefit to clients of trading with a firm with the EUR730K license, is that these firms have significantly increased regulatory risk capital which affords the clients a higher level of protection. This license application also requires a more robust risk management process alongside detailed future capital planning.

Operationally we have been aligning existing clients with the new leverage settings, as well as working with traders who are able to move to a professional classification. There has been work around the client on-boarding journey to align with the new rules, with changes to risk warnings across the website, social media and a range of communications. We have also actively engaged with our client base to educate them on the upcoming changes and likely implications for them.

Additionally we have recruited in areas which allows us to change our focus away from retail and onto professional clients. We have  recently hired Ashraf Elgarf, an experienced and well respected senior professional client sales trader, as well as Steve Whittet and Chris Andrews in the B2B and Institutional sales space.

As always, we have continued to invest in new technology on the risk management as well as the trading side, which will include the launch of our webtrader version of our proprietary OREX platform.

LR: How do you see the industry changing (at least in Europe) in the aftermath of ESMA’s new rules, and given the generally ultracompetitive nature of the business lately?

Mathieu: The biggest immediate impact has been around the categorisation of clients, with the emphasis on the professional client criteria, which has now become the key target market for the industry.  This is because the reduction of leverage available across a range of asset classes for retail clients puts pressure on this financial model. For example retail clients , prior to 1st August 2018, could access leverage of 500 to 1 for FX majors, but this will now be restricted to 30 to 1. A 94% reduction in leverage will clearly have an adverse impact on volumes, which will reduce both ‘flow’ and ‘risk’ revenue for brokers.  The short term economic viability of the retail client segment will be severely stressed.

The industry has already seen a re-focus towards the professional segment with the majority of companies making significant strides to ‘opt-up’ their existing client bases to the professional categorization. After the 1st August this segment will be the target market for client acquisition and it will be extremely interesting to see the potential impact in terms of revised marketing focus. The traditional cost per click for some of the more typical keywords associated for retail client acquisition are sure to be impacted.

The standardisation of segregation for professional client funds is a further change which benefits clients, but it will clearly restrict the less capitalized brokers ability to attract and transact professional client business. Smaller firms will not have the spare capital to offset the larger deposits of professional clients. This creates a barrier to entry into this market segment and is part of the reason why it seems highly likely that in the coming 6-12 months we will start to see some consolidation in what will become an ultracompetitive sector.

We expect to see further development in regulation as the ESMA changes could create arbitrage opportunities for retail clients taking advantage of zero balance protection by having equal and opposite positions at different providers. A SNB type event would potentially have catastrophic implications for a firm on the wrong side of the guaranteed stop outs.

Another outcome, which we are sure ESMA will monitor, is retail clients looking outside the region for a provider who can offer higher leverage levels. On a similar note, it will be interesting to see how the regulator reacts to some brokers who are ‘pushing’ their retail clients to their entities outside the ESMA region. This is permitted as long as the regions are seen as equivalent jurisdictions in terms of client protection and regulation (i.e. Mifid 2 rule mapping). Whilst this may be allowed its clearly not within the intended spirit of the regulation.

LR. What has ADSS’s approach been to cryptocurrency trading, which we have seen has driven volumes and revenues at some of even the largest FCA regulated brokers?

Mathieu: Cryptocurrencies have driven a huge amount of interest in the CFD space over the last 12 months. The staggering increase in price towards the end of 2017 generated demand not only from existing clients, but a surge in business from new clients to the CFD space. ADSS’s approach has been to concentrate on four of the most liquid and reputable cryptocurrencies, with responsible leverage of 4 to 1 which ensured we were not over-leveraged in this space.

The start of 2018 then saw the rapid decline of the cryptocurrency values and just as quickly as clients had generated substantial profits on the price surge, these were quickly unwound on the move back down. From Q2 of 2018 onward we have seen clients take a longer term view with a ‘buy and hold’ mentality, mirroring their approach to trading equities as opposed to far more short term speculative trading seen previously. Without a doubt the returns and interest for this asset class have reduced substantially as the price volatility has significantly reduced after Q1, that said as a firm we are keen to continue building our offering in this space as we believe there is long term value for clients and there is a genuine interest from clients for new products such as Crypto’s.

LR: What else can we expect to hear from ADSS in the coming months?

Mathieu: As previously highlighted we continue to invest heavily in its technology, particularly the OREX platform, supported by recruitment of senior experienced professionals across the business to help diversify the Firm in an ever more challenging regulatory environment. The global standing of ADSS ensures it is strongly positioned to benefit from the opportunities the new regulations are likely to create.

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