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Emerging markets, and the ability to succeed in such regions are key points for Forex companies to consider, especially some of the Middle East’s up and coming regions.
Turkey has become a jurisdiction of choice for many large companies since its national regulator began to stipulate a series of reforms which would empower customers.
LeapRate spoke in detail to Mehtap Önder, Regional Director of CFH Clearing, in order to gain her perspective, one year since having assumed her position as Regional Director of CFH Clearing Ltd in Turkey.
Ms. Önder was promoted to her current post in March last year, having previously served as Head of Legal Onboarding at CFH Markets for two years. She joined the firm in May 2011 as a Legal and Compliance Consultant, and is a specialist in commercial law,
having graduated from Copenhagen University in 2010 with a Masters degree in Business Administration and Law. Prior to joining CFH Group, Mehtap was a Legal and Compliance Advisor at GE Money Bank for four years.
What initial steps did CFH take in order to enter the Turkish market, and what challenges did the firm face?
We were monitoring the Turkish market for a number of years but were initially hesitant due to the lack of regulation at that point. When the regulation situation changed in August 2011 we saw the potential to enter the market but knew it would be a challenge to be present in Turkey without the cultural and linguistic understanding.
At that point, I was working as Head of Legal & Onboarding for CFH Clearing and had ongoing relationships with brokers, assisting them on various legal and regulatory matters. It became apparent to our CEO that I had a flair for relationship management and he felt I could be a great match for the Turkish market – especially as I’m a Turkish speaker and understand the business mentality in the region. The company showed me great trust and awarded me the responsibility for the whole region. To be acknowledged and supported by such talented and experienced people within the industry was enough to change the direction in my career.
My new role as Regional Director required a lot of travelling and long working hours as I faced the challenge of establishing our name in the market. There was close to zero awareness about our products and technology and we were competing for business against well-established and respected names. However, I’m pleased to say that our entrance into the Turkish market has been very successful.
Brokerages in Turkey are required to have an in-house technology provider. Did CFH implement its own domestic-market technology firm, or can the London-based head office be used as it is part of the same company?
At CFH Clearing we attach great importance to being present with our partners in their specific region. We pride ourselves on having “Global Reach, Local Knowledge”. In fact, we believe global reach is only possible with local knowledge – one of our highest priorities is not to compete with our partners in their region but to work in close collaboration with them. This equally applies in terms of technology solutions.
Our unique technology service offerings are backed by our dedicated in-house IT-department, a team of highly qualified professionals who possess years of relevant experience as well as expertise in all aspects of the industry. One of the important parts of their workflow is to be present in the region to support the partner until it is up and running. Our partners value the fact that we offer 24 hour technical support with Turkish speakers, ensuring they can access high quality technical support whenever they need it.
Turkey has been one of the more active markets in the Middle East for retail FX over the last 5 years. What are the differences pre and post regulation, and how does this affect liquidity providers serving brokerages in the region?
I think it’s important to understand why the Turkish market has been such an active market over the last 5 -10 years. Turkey is currently the fastest emerging market in Europe and OECD with its population of 76 million and the highest youth population in the EU. The labor force is 28 million which makes Turkey the 4th largest labour force out of 27 EU countries. Turkey is, in fact, the world’s 16th and Europe’s 6th largest economy.
Within only 4 hours by plane, Turkey has access to 1.5 billion customers in Europe, the Middle East and North Africa and to markets with a total $25 trillion GDP. Turkey therefore has huge growth opportunities which of course also has an impact on the FX industry. In my opinion, as a result of all these facts, Turkey is one of the most interesting markets to observe and to be a part of.
Turkey pre regulation was similar to any other region without regulation. It was a region with “self- regulation” and therefore traders had no protection. There was no transparent trading, which of course lead to the fact that traders started to lose their trust in the industry. For example, some brokers would give their clients leverage up to 1: 500 without explaining the risk involved.
Today we see a totally different and highly regulated market. During the first couple of years after regulation was introduced in August 2011, the market had to find itself again. Traders needed to build their trust towards brokers again and brokers had to get used to the complexity associated with being compliant with the new regulatory requirements and the new costs involved. However, after managing these challenges, retail traders today can be totally confident that they can choose any broker they wish in the region and expect consistent, high levels of regulatory protection.
I believe having one of the strictest regulatory regimes helps strengthen the industry in Turkey. The FX industry in Turkey is growing rapidly, with trading volumes surpassing $10 bln per day and $250 bln per month.
Liquidity providers have also had to adapt to the regulatory requirements. Being regulated by the FCA in the UK and having a continued positive dialogue with our regulators, CFH Clearing is no stranger to regulation. In fact, we place great emphasis on being compliant within any region we enter and Turkey has been no different. We have made significant investments to ensure that we are fully compliant with Turkish regulation.
What should a new brokerage wishing to establish in Turkey bear in mind?
Turkey is not a new market in the FX industry. People I meet from the different brokerage houses are highly qualified professionals with many years of relevant expertise in the industry. The competition is therefore particularly fierce in Turkey and in order to enter the Turkish market you must significantly differentiate yourself from the rest of the brokers.
In addition to having a clear strategy about how you will differentiate yourself in such a crowded market, a new broker should also carefully select the right technology for their current and future needs and have a scalable infrastructure which meets all the regulatory requirements.
I also think one the key aspects to take into consideration before entering the Turkish market is the social and cultural factor – differences like language, religions, social standards and norms. For instance, in some cultures people are formal and structured whereas others are informal and flexible. Understanding the professional etiquette in the region is key to success.
In Turkey there is a demand and an expectation of high service levels. Brokers should be ready to provide the level of service required – this is paramount when entering and staying in the Turkish market.
But at the end of the day the quality of your market research and the flexibility of adaption can determine the success of your entry into new foreign markets.
In your four years at CFH, which began in a legal capacity before becoming Regional Director for Turkey, what has been the most interesting aspect, and why?
As a part of the legal team it was very interesting to see how the industry became increasingly regulated and difficult to manoeuvre in – now as a Regional Director I experience first-hand the results of the strict regulations. What I enjoy the most is working in partnership with our clients and helping them to grow their businesses.
By becoming Regional Director I was pushed out of the nest and directly into the wilderness – being out of my comfort zone has accelerated my learning curve both professionally and personally.
It has been very interesting to explore a new side of the FX industry. Turkey was a new territory for both me and CFH. With limited existing relationships, I had to gain an in-depth understanding of the Turkish brokers’ business needs in order to serve and empower them in their region.
Since assuming your current position as Regional Director, CFH Clearing has managed to attain approximately 30% market share. How was this accomplished?
We believe “one size doesn’t fit all” – we know different businesses have different needs and requirements, which is why we put a lot of energy and effort into familiarizing ourselves with each and every partner. We engage and execute in the best interest of our partners.
We are positioned to service the entire market space by providing a full service brokerage solution, from front to back-end hosted trading solutions. Our solutions are modular so clients can pick and choose the elements which most suit their needs. This ensures we have the flexibility to tailor-make our services according to our partner’s requirements and their business strategies.
This is particularly necessary for the Turkish region, and probably one of the main reasons for our swift success, as we have the tools, expertise and resource available to react and execute in an ever changing market space.
As already mentioned, our local knowledge and linguistic understanding has been key in this market – we can relate to their cultural and political environment and clearly understand the local business mentality. As such, we are able and committed to accommodating Turkish clients’ expectations of high level of service and presence.
It has certainly helped that CFH Clearing is a well-known and established brand in the industry, with several big and respected partners globally, which is a huge benefit when talking to clients and prospects in Turkey.
What do Turkish firms favor about ClearVision?
The customization opportunities are particularly attractive to brokers. In addition, ClearVision is fully compliant with Turkish regulatory requirements – this makes it a unique, easy and affordable solution for any brokers with high demands for maximising income flow and securing proper risk management standards. Furthermore brokers have the opportunity to add and aggregate multiple liquidity sources. ClearVision has been tried and tested amongst brokerages of all sizes across the globe and has proved to be durable and reliable as well as easy to use.
As a commercial lawyer, how do you view the obstacles of operating in regions which require brokerages only to onboard domestic clients, compared to those working globally?
Of course it has its limitations, however I don’t view this as an obstacle. Turkey is an emerging market with a growing middle class, higher minimum wages and a general interest in finance and a search for alternative income streams. This means the market is yet to reach its full potential – new traders join the market every day. The value of these traders depends on their level of understanding and experience, which means brokers with great educational offerings have the opportunity to maximize the individual traders’ value and lifetime – and thereby conquer bigger domestic market shares. I believe this is the case for many emerging markets.
What is CFH’s vision for the Turkish market for the immediate future?
By providing a full suite of customized services we equip and empower our partners to conquer their market. This of course means offering educational services as well – we want to ensure that our partners have many long-term and valuable traders. Their success is our business.
Our growing market share has led us to invest in Turkish client service personnel to ensure our Turkish clients receive a consistent and committed service in all aspects of our partnership.
In the past six months we have received a lot of demand for our products and services from new to well-establish brokers in Turkey. We are excited about onboarding our new partners and very optimistic about further growth in Turkey.