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Retail Trading Tech in 2019

Merry new year fellow Finance Magnates reader! We hope that you enjoyed the festive season and, whether you were spinning a dreidel or roasting a turkey, that you managed to eat and drink as much as possible over the past couple of weeks.

Now, sadly, it’s all over and us poor plebeians have, once more, to put our cold, wintry noses back to the ever-spinning grindstone of work. But before you get too upset about it all, we thought we’d give you a dollop of excitement to kick off the new year by having a look back at some of the past twelve month’s most interesting technological developments.

As Confucius once said, in true LinkedIn-inspirational-quote fashion, “study the past if you would define the future.” Yes, we’ll be looking at 2018’s technological trends but it’s those same trends that will be influencing the next year here on planet earth. Excited? I thought so. Strap yourself in, it’s going to be a wild ride.

Rise of the professional

Back in August, as I’m sure you are aware, the European Securities and Markets Authority (ESMA) introduced a series of product intervention measures. Binary options bans, leverage caps on contracts for difference and risk warnings were the name of the game

There was – and still is – one way around these restrictions. Anyone that classifies as a ‘professional trader’ can still use a broker based in the European Union to trade with high leverage.

Unsurprisingly then, 2018 saw a swathe of firms launching professional trading platforms to fit with a broader strategy of attracting a wealthier, professional client base.

The most recent example of this came just before the Christmas holidays began. In early December, Ayondo, a retail broker, announced that it would be launching AyondoPRO. The only ‘PRO’ thing about it, however, seems to be users’ ability to trade with high leverage on the platform.

Ayondo was not alone in launching such a platform. CMC Markets, InterTrader, Activtrades and FXCM have all beefed up their professional trading platforms or launched entirely new ones in the past twelve months.

These new products would seem to signify two things; some firms are trying to adjust their business strategy and focus on attracting a smaller number of wealthier clients. Other firms are sticking with the churn and burn model and, to sustain that, are just converting all of their clients to professional status.

Artificial Intelligence

Artificial Intelligence (AI) is kind of like God, everyone talks about it but they all seem to have a different conception as to what it actually is. Much like John, the author of Revelation, they also think that it’s introduction is going to bring about some interesting changes to life as we know it on earth.

At the end of 2018, the planet hadn’t transformed into an I-Robot-esc dystopian future. Nonetheless, we are starting to see artificial intelligence filter its way into to the retail brokerage industry.

Most notable in this regard has been Capital.com. Since launching in 2017, the broker has made its artificial intelligence-based education system a focal point for attracting new clients.

The system works by examining a client’s trading patterns. It can then identify biases and problematic behaviour and tell the client how to prevent any poor trading decisions that may follow as a result of them.

From the client’s perspective, the efficacy of this system is debatable. Capital.com follows a common pattern with just under 80 percent of clients losing money. But as Finance Magnates reported last month, most clients are right most of the time when they trade – they just lose more than they gain from their losing trades.

More interesting things are arguably happening in the sales space. Impact Tech, a technology provider to the retail trading industry, launched an automated sales solution at this year’s Finance Magnates London Summit that, rather creepily, can make calls to prospective clients and on-board them.

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In fact, it may be on this side of the business – marketing, customer relations and lead generation – that we see the greatest use of artificial intelligence. Newcomers to the market, such as Antelope Systems, are illustrative of this.

The firm was launched in late 2017 but really got going last year with the appointment of Ori Hazan as CEO in early February. As with Impact Tech, the company uses some spookily advanced technology to make a company’s lead and marketing efforts more efficient.

Of course, given AI’s huge potential, every Tom, Dick and Harry is slapping the label on to their product – even if it’s just a modded dial-up connection. Remember to proceed with caution then Finance Magnates reader, there are a lot of hucksters out there in the ether.

The year of the blockchain

Speaking of hucksters, blockchain was arguably the technology of 2018. Haven’t you decentralised your distributed ledger cryptocurrency hot wallet yet? I’m shocked.

The usefulness of blockchain is more than debatable. One severely under-reported study that was released in November found that the technology, at least in cases where it was being used to support international development and humanitarian aid, had no practical use.

The three authors of the study contacted 43 different companies building products which they claimed could support international development. Of those 43 firms, zero were able to support statements they had made about their products’ ability to reduce costs, increase transparency and improve operational efficiency.

Cobalt Co-Founder, Adrian Patten

Still, blockchain is definitely making waves in both the retail and institutional trading space. Most notable in regard to the latter has been Cobalt. The post-trade services company has built a blockchain system that it claims can reduce post-trade costs by 80 percent.

The success of such projects is now heavily dependent on financial institutions’ willingness to engage with them. This was something that settlements giant CLS found out earlier this year when a significant proportion of its prospective clients were unwilling to start using its blockchain-based payments netting solution.

“The biggest challenge for us [in 2019] is clearing the hurdles required in order to work with established financial services firms,” Adrian Patten, Co-Founder and Chairman of Cobalt, told Finance Magnates. “Vendor risk management at banks consists of multiple layers of legal and compliance and risk management requirements. New vendors have to jump through a significant number of hoops to get through this process. However, if current incumbents tried to go through this process, they wouldn’t be able to meet all the requirements. So newer firms are held to a higher standard than the existing incumbents.”

Back in the retail space, the mass-introduction of cryptocurrency trading products has been the most notable effect of blockchain technology. As we enter the early days of the year 2019, you will struggle to find a single retail broker that isn’t offering cryptocurrency products.

In fact, legend tells of a number of retail brokerage owners that have switched to only offer cryptocurrency trading. How respectable those owners and their operations are is another matter.

Many of the naysayers may claim that cryptocurrency trading is kaput given that Bitcoin’s value has been tanking since November of 2018. That might be true but it would be equally valid to say that it’s a positive step for the retail trading world.

The hype that surrounded blockchain and cryptocurrency in early 2018 was not sustainable. Manic, get-rich-quick traders who popped up then were not in it the for the long run and, more significantly, they were easy pray for unscrupulous conmen.

A market that rids itself of people eager to make a quick buck also ejects many brokers who want to steal those people’s money. So yes, the blockchain and cryptocurrency hype has died down, but that may well be a very positive thing for the retail industry – bring on the New Year!


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