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As far as dramatic and turbulent events within specific companies in the FX industry are concerned, the difficult path which UK-based spread betting-to- foreign exchange firm London Capital Group (LCG:L) has trodden over the last few years ranks among one of the most closely followed.
Whilst many of its peers within the world’s largest financial center prospered and flourished, LCG made sustained losses, causing it to become a takeover target, and attracting three potential suitors in March 2013, namely GAIN Capital, Cantor Fitzgerald and City Index, all of which bowed out leaving the ailing firm’s future in limbo…. until now.
Today, in an exclusive interview with LeapRate, new owner and one of the FX industry’s most prominent leaders, Charles-Henri Sabet, explained his plans for the future of LCG, and its entire ground-up rejuvenation.
Mr. Sabet first addressed the question which is likely to be on the minds of a great many senior industry figures, explaining his rationale behind his taking the helm at LCG in a transaction which injected £17 million into the firm. “London Capital is a great name which caught my attention and then it was a simple calculation of price versus opportunity ,” enthused Mr. Sabet.
“The company is London-listed but at the time was trading at an historic low. There is always room to turnaround management which we will do. In terms of corporate vision, LCG in its current state is a clear UK spread betting firm. 90% of business is spread betting, and 10% of its business is represented by FX Agency activity which includes selling platforms such as EBS or Currenex” Mr. Sabet explained to LeapRate.
“To go a step further and take the company into the future, the idea is for it to be transformed entirely and become a real online trading player – across borders and platforms. To offer trading beyond the UK, we will focus first and foremost on FX. We need to be recognized in new countries, therefore we would primary player in FX to start with” explained Mr. Sabet. “How to do this is being carefully considered we will start retail FX, which will be offered across a number of platforms” he confirmed.
Speaking with regard to the firm’s recent interest in specialist firm Algoweb, Mr. Sabet indicated that the purpose of this is to receive liquidity and distribute it to any customer that LCG wants, across both retail and institutional sectors. “We are able to offer a prime of prime facility to clients whose requirement is on a level slightly higher than that of standard retail customers” stated Mr. Sabet.
As the company begins to grow in its new form, Mr. Sabet confirmed that once a noticeable growth has been achieved in FX, the firm will be able to align the product and also be able to be a premium provider of equities, indices, and other key asset classes.
One of the keys to future success is ensuring the right key personnel are on board. Working closely alongside Mr. Sabet is another top FX industry professional, ex-FXCM Managing Director Francois Nembrini. After a career within the upper echelons of the world’s largest retail FX brokerage, Mr. Nembrini joins LCG as Global Head of Sales & Trading.
As far as commercial strategy is concerned, Mr. Nembrini detailed to LeapRate today that “In terms of market environment, the new strategy will work. The core is to centralize all activity and technological facets in one place. The recent on-boarding of Algoweb and Smarttrade allows to plug liquidity into any area we want, which in turn allows LCG to roll out a multi-asset solution.”
“What we have seen in the last couple of years is an entry opportunity into the mid-market. Banks have pulled back while demand from trading customers remains strong. As the fortunes of the big banks have contracted, bank trading has suffered which in turn has created credit restrictions and inflexible trading terms. Meanwhile a lot of excellent bank traders have been let go by those same major banks as they are being forced to pull back from or entirely out of some markets, . Traders are looking for non-bank alternatives that are reliable and provide competitive pricing and so we are able to step in and plug that gap in the market, employing the same quality people that were at the big banks, used to offering a quality product. We want to bring into the market an institutional service to all our customers” continued Mr. Nembrini.
With regard to other developments which reflect LCG’s newfound direction toward leading edge technology, Mr. Nembrini explained to LeapRate that “LCG will offer a very comprehensive voice business run by Peter Wells, whose provenance includes 28 years at British electronic trading conglomerate ICAP, alongside a former head of spot at a major league international bank Between them, they will create a voice service that will provide an all-encompassing service to all institutional high net worth and retail clients.”
Mr. Nembrini concluded by explaining that “LCG wants to give quality research, distribute pricing across many places so that retail clients can get the platform that they want and need, meanwhile giving institutional style multi-platform environment with centralized booking thus providing a prime brokerage style service to all customers.”
Citing reasons for why none of the aforementioned approaches for LCG materialised in the early part of last year when first showed interest, it has been confirmed that those firms wanted to buy the customers of LCG. No firm seems to have wanted to take on the actual company, and no entity demonstrated an interest in upgrading the technology and infrastructure. This is what LCG’s forte is – the potential to become a technological leader and major international force from its London base.
LeapRate posed the question as to why it wouldn’t have been easier to simply start a new company rather than go to the trouble of taking on existing firm in the doldrums which may involve an overhaul of the entire firm’s corporate structure, Mr. Sabet’s astute business acumen was quite clear in his answer: “When you start from scratch, you need to make a licence application and then hire key people before doing anything else. All of the key people are already placed in key positions across other companies. I would find it difficult to attract them by asking them to come with me, resign from their existing, perfectly good positions, and then tell them that they will start working with a brand new, unknown company in one year’s time. This is not motivating at all!” Mr Sabet pointed out.
He continued to explain that “By the time you find the premises, and decide on business model, then complete the bureaucracy, it then takes between 12 to 15 months to see the first client. I would rather take a company which is experiencing a difficult situation and revitalise it. LCG still made over $20 million revenue for the first nine months of this year – it’s better to work with this. I admit that this approach represents a different way, especially in this case, however I liked the name, it has fantastic potential.”
“It is time for a change and so inevitably under new leadership much of the previous management team is moving on to make way for the new while there remains a core of high performers, all keen to stay on and be part of the new chapter in our growth. We have a good brand proposition, and the top calibre executives that have joined us since our transaction was completed really proves that the challenge is worthwhile. Francois is probably one of the top people in the industry worldwide, and he did not hesitate to come on board. Nicola Berardi, after helping during this acquisition is now out board advisor. He was the former CFO at Synthesis Bank, which I sold in 2007.”
On parting, Mr. Sabet’s enthusiastic and bright view of LCG’s future was explained as he cited a “great opportunity here. The latest figures lay down in raw numbers the results of operations under former management, now we can make a clean start with a fresh set of numbers.”