IronFX CEO interview – doing business in China, IPO and more

When you become big, you become a big target. And lately it seems as though there’s no bigger target in the retail forex world than IronFX. After LeapRate broke the details of IronFX’s planned IPO late last year including information showing that the company does about $300 billion of monthly volumes, it seems as though the company has become a magnet for both good and bad press.

So we decided that we’d go right to the source and clear the air with Markos Kashiouris, founder and CEO of IronFX.

LeapRate: Hi Markos. First off, can you please give us an overall description of IronFX’s business and operations.

MK: IronFX is one of the top global FX brokers with 27 offices in 25 countries around the world. We are recording monthly volumes of $300 billion, which puts us at the top tier of global brokers on the basis of the publicly available information of our largest competitors. We offer our customers over 200 tradable instruments, including over 120 currency pairs, via CFDs on FX, metals and European and US listed stocks and futures. Since we commenced operations in December 2010, we have experienced significant and rapid growth, with active accounts of 345,000 as at the end of September 2014 and 490,000 as at the end of December 2014.

We employ account managers to identify, develop and maintain relationships with customers and independent referring brokers and to provide service to customers that these brokers refer to us as well as customers acquired by us directly. As at September 30 we had 786 total employees, out of which 458 are account managers located in our offices around the world servicing customers in over 45 languages.

We also have a large referring broker in China affiliated with us, named IGHG, which operated 31 offices with 872 employees in China as at September 30. Some news reports have indicated that IGHG is a subsidiary of IronFX. It is not and IGHG has a normal IB agreement with IronFX in line with any of the other 6,500 active IBs that we have globally.

According to available market data, we believe that we are one of the top global retail FX brokers in every significant KPI (volume, accounts, revenues and profits).

Furthermore, the company has grown:

  • In terms of revenues by 6x in 2012 over 2011, by 5x in 2013 over 2012 and by 2.5x in 2014 over 2013
  • In terms of profits, the company has grown by 5x in 2012 over 2011, by 2x in 2013 over 2012 and by 5x in 2014 over 2013
  • In terms of volume, by 5x in 2012 over 2011, by 3.5x in 2013 over 2012 and by 2.5x in 2014 over 2013
  • In terms of active accounts, by 6x in 2012 over 2011, by 6.5x in 2013 over 2012 and by 5x in 0214 over 2013

LeapRate: That’s quite impressive Markos. Not too many brokers have made the jump from niche / mid-size to the big leagues and nine figure monthly volumes and a truly global presence. What factors differentiate IronFX from the rest of the global brokers?

MK: We focus our customer acquisition strategy on a “high touch”, relationship-centric customer acquisition strategy with regular customer interactions and a calling effort similar to that of a traditional brokerage rather than a customer acquisition strategy focused on online, pay-per-click and search engine marketing efforts. We principally acquire customers through referrals from independent referring brokers who typically are present in the local markets where our customers are located and with whom we have a non-exclusive referral agreement. We use our global Account Management force to service both the referring brokers and our customers.

Rather than devoting most of our promotional financial resources to online marketing campaigns to acquire individual customers, we instead focus on establishing relationships with such referring brokers who are a potential recurring source of new customers. We believe our local presence in key markets, through our network of local offices and the native language skills and diverse cultural backgrounds of our account managers and referring brokers, provides us with a significant opportunity to access customers who select an FX provider as a result of in-person interactions rather than online marketing.

LeapRate: What are IronFX’s key markets and products, and what are the key targeted ones going forward?

MK: IronFX currently offers its services and products in most regions around the world, with notable exceptions North America and Japan. Our largest market is Asia which are geographies with high growth rates in the retail FX sector. In terms of products, for the 9 months ended 30 September 2014, CFDs on currency pairs accounted for 85% of our trading volume, CFDs on metals 13% and CFDs on other products 2%.

LeapRate: How do you see the key trends characterizing the global FX market? What are the main challenges?

MK: We believe that customers in the retail FX industry are becoming more sophisticated and, as a result, require a wider variety of products and higher quality of service. Apart from our wide product offering, our scalable technology infrastructure allows us to add new product offerings quickly and at a relatively low cost. In response to what we perceive as a higher expectation in the market for personalized service, we assign each customer a dedicated account manager. We also believe that customers are generally seeking counterparties who can offer better pricing through tighter spreads and lower commissions, faster and more consistent execution of their transactions and lower margin. We offer customers a choice of several different types of trading accounts depending on the size of the account and give customers the option to select whether we charge a commission for each trade or add a trading spread to our quoted prices. We offer our customers up to 500-to-1 leverage, depending on the characteristics of the customer and the account type.

The key challenge in the industry as often discussed by many market practitioners is regulation. For IronFX though, tighter regulation is something that we are welcoming in order to increase the overall transparency of the industry and its players. Given our commitment to complying with regulatory bodies around the world, IronFX is regulated by the Cyprus Securities and Exchange Commission (CySEC) in Cyprus, the Financial Conduct Authority (FCA) in the United Kingdom (where regulatory passport rights for both subsidiaries have been exercised to operate in a number of European Economic Area jurisdictions), the Australian Securities and Investment Commission (ASIC) in Australia, the Financial Services Board (FSB) in South Africa and registered with the Financial Service Providers Register (FSPR) in New Zealand. We have an in principle license from the DFSA in Dubai. We are also members of the self-regulated bodies of CRFIN in Russia and UKRFIN in Ukraine.

LeapRate: How would you define IronFX’s strategy?

MK: Our strategy revolves around the following pillars:

  1. Continued expansion of local presence in target markets. We intend to support our continued growth through the further expansion of our local presence in our target markets, with a particular focus on emerging markets.
  2. Continued growth in account management team. We intend to continue to expand our account management team in Cyprus and selected local offices by hiring new account managers with relevant language fluency and training them using an in-house, structured and wide-ranging training course.
  3. Brand enhancement. Our marketing efforts are primarily focused on building awareness of the IronFX brand in our target markets and China in particular.
  4. Selectively acquire competitors. The retail FX industry is currently highly fragmented, with a large number of small players and without any dominant larger player. In this environment, we anticipate that there will be opportunities to expand through the selective acquisition of other retail FX brokers.

LeapRate: Let’s talk a bit more about China, where you clearly have a big presence. There has been some press coverage on delayed payments to IronFX’s clients in China. It actually seems to us that someone out there is deliberately trying to ‘get you’, given your success. Can you please comment on this?

MK: We have identified a group of abusive traders that employ an abusive trading strategy to manipulate our promotions. This group has been placed under investigation for breach of our trading terms and pending this investigation we have put a limitation on all promotions-related withdrawals from this abusive trading strategy as we are entitled to do. This group accounts for only 1.3% of the total number of clients who maintain active accounts with our company.

We have received no complaints or other formal notification from CySEC or any other of our seven regulatory authorities about withdrawal delays. Please also note that all withdrawals are being processed in accordance with our obligations and in line with the normal industry processing times.

Any purported “complaints” are clearly defamatory and may be linked with the recent rumors about the company pursuing an IPO on the NYSE. They follow a line of rumors about our business practices directed against our success, none of which are true.

In its five-year history, IronFX Global has never received a formal notification or fine from any of the seven regulatory authorities to which it reports (CySEC, FCA, ASIC, FSP, FSB, CRFIN, UCRFIN). IronFX Global will continue taking the measures to which it is entitled to protect the legitimate interests of the company and the 490,000 clients who maintain active accounts with the company.

LeapRate: Can you confirm the plans for a US IPO as reported by both LeapRate and the Wall Street Journal in early December?

MK: I cannot comment on this despite the recent international press coverage. However, we do not consider the rise of “complaints” and “client-action” in China post December 8th as coincidental.

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