Etana Custody on conflicts between traders and brokers – LeapRate Interview

Continuing LeapRate’s Exclusive CEO Interview Series, today we bring to you Brandon Russell, CEO of Etana Custody, a company born out of an innovative approach to key pain points experienced by Capital Markets participants.

What does Brandon think on the statement that RegTech the new FinTech? How does he plan to mitigate the conflict between traders and brokers?

You can read about all of this and more in the Q and A below:

Brandon Russell

LeapRate: Hi Brandon, thanks for joining us today… Could you first share with us what kind of company is Etana Custody?

Brandon: It seems that everyone likes to jump on a trending tag. In Etana’s case, that would probably be RegTech. Etana Custody provides custodian and risk management (compliance) services aimed at the retail forex segment of the capital markets. The goal is to provide a ‘safe space’ by acting as a mediator of sorts between various market participants. By doing so, retail traders have an extra pair of eyes on their account. Brokers in turn, can minimize regulatory risk and segregate client assets. The byproduct being that brokers get to build trustworthy relationships with their customers.

The custodian aspect of our service is provided through our proprietary platform which allows brokers and retail investors to face each other through an e-wallet. Etana pulls trade information in real time (via API) so that investors can see their trade balances at a secondary source to the trading platform.

LeapRate: How could you describe the term “Regtech”?

Brandon: The marriage between regulation and technology, while not new, is certainly becoming increasingly important. The Financial Conduct Authority (FCA) first coined the term “Regtech” describing it as “a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities”. Since then, the term has come to be associated with any company seeking to assist in meeting the demands of regulation. Etana aims to use technology to help businesses comply with regulations efficiently and inexpensively.

LeapRate: Can you agree with the statement that RegTech the new FinTech?

Brandon: Not exactly. We see RegTech as an extension of FinTech. For some time now, FinTech has been a disruptive driver towards efficiencies. As regulation became increasingly important, RegTech became the logical progression in the pursuit of using technology to meet demand.

LeapRate: You say that there is a conflict of interests between traders and brokers. Is my broker trading against me in the first place?

Brandon: We’re not going to call a broker’s ethics into question. There are plenty of brokers who deploy best practices and meet the demands of the regulatory environment. Unfortunately, there are also brokers who do not adhere to best practices. We’ve seen brokers who claim to use STP but run a dealing model. There are also brokers who simply b-book all their order flow. In this scenario, a conflict of interest exists. The broker is incentivized to see you lose on any trade you enter.

LeapRate: Can you give us some perspective about this conflict between traders and brokers? Rising or settling down?

ESMA has attempted to address this conflict. The idea that a business would run a model where it is rooting for its customers to fail is a problem. Brokerages need to act in a manner that shows them to be professional and fair. That they are acting in the best interests of their clients which includes avoiding conflicts of interest.

Unfortunately, brokers find workarounds to this by offshoring their b-book flow or simply by not complying with the regulatory directive. There are plenty of online forums devoted to customers complaining about broker behavior. It is really a case of buyer beware.

LeapRate: How do you plan to eliminate this conflict?

Brandon: Eliminate is a strong word. Etana seeks to mitigate this reality by creating a ‘safe space’ and acting as a mediator between various market participants. Etana’s proprietary platform allows brokers and retail investors to face each other through an e-wallet. In so doing, customers have an extra pair of eyes on their accounts and can access account balances in real time. Included in this service, is a provision for dispute resolution where Etana can request the NFA report from the broker to assist in meaningful and fair resolution.

Many service providers insert themselves into the trading relationship and are remunerated on trading volume. Etana has taken a position that this in contrary to our ethos and consequently has a fee based model. This allows both brokers and trading clients to better budget their costs.

By engaging Etana, brokers provide their customers peace of mind knowing that there is segregation of client assets all while maintaining the integrity of the broker-customer relationship.

Brandon Russell found his own company, Alderon Capital Management, in 2006. He there managed external third party marketing relationships for a North American commodity pool operator (CPO).

In 2012 Brandon Russell was appointed President of Sales and Operations for the Americas at Swedish brokerage solutions firm Fair Trading Technology before moving on in October 2013.

Founding Etana Custody has been conducted alongside Mr. Russell’s FX consultancy firm Alderon Management, which he has been a director of since 2008.

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