Table of Contents. FXDD s Business. Who Are We? Important Milestones. Overall Market Dynamics. Target Market and Objectives.

Transcription

1 Business Profile

2 Table of Contents FXDD s Business Who Are We? Important Milestones Overall Market Dynamics Target Market and Objectives FXDD Highlights 2 3

3 1. FXDD s Business FXDD (the Company ) is a global leader in the online foreign exchange ( FX ) business. The Company provides access to the spot FX market for individual and institutional investors with various degrees of risk appetite and sophistication. FXDD was founded in 2002 by Tradition (North America, Inc.), a division of Compagnie Financiere Tradition in Lausanne, Switzerland ( Tradition ), and Advanced Technologies Group Ltd. ( ATG ). Current members of the Company are Max Q Investments, LLC (80%) and Tradition North America (20%). FXDD Malta LTD started operations in Malta in 2010 to cater to non US clients world wide offering higher leverage terms. FXDD maintains streaming prices for the exclusive use of its clients in no less than 33 spot trading pairs. Our clients are able to execute trades in the spot foreign exchange, precious metal, and commodities markets on the FXDD trading platforms for speculation in price change or for hedging purposes. By providing bid-offer spreads to its client base, FXDD is able to capture this spread. Most of FXDD s revenue is derived from capturing the difference imbedded in the spread. This particular business model places FXDD in the middle of the transaction and opens it to limited exposure based on adverse market movements. FXDD employs several strategies to mitigate the risk of excessive adverse directional volatility. At any time, FXDD can offload risk and thus reduce or eliminate its exposure to our liquidity providers by accessing virtually unlimited trading lines. To professionally serve and expand our customer base, FXDD has developed a suite of products that appeals to each specific group of customers. These products include our Power Trader (multi-bank ECN) platform, which appeals to our institutional and professional clients, and Mirror Trader, which offers multiple trading systems automation to our more retail-driven customer base. The Company is one of the very few online FX platforms capable of offering such a variety of options. 4 5

4 In addition, FXDD is constantly expanding its market share by establishing white label partnerships. FXDD has successfully integrated third-party front-end trading systems and has also implemented turnkey retail trading solutions for introducing brokers, FCMs, broker dealers, and other institutional-level entities. In early 2012, FXDD created an IT service subsidiary that can create custom end-to-end white label solutions for each of its retail platforms. Some of the major advantages of these institutional solutions are: There is practically no R&D or testing cost to the partner. The implementation time is very short, typically days depending on the size and requirements of the partner. The partner can potentially generate revenue and income from day one of its operation. The partner has the option to outsource most or all back-office processing and functionality to FXDD. FXDD provides the technological know-how and operational logistics so that the resources are utilized in the most effective way. FXDD also provides the necessary liquidity so that the partner does not need to secure its own liquidity or assume risks. FXDD can guarantee that the partner s customers never go into negative equity as a result of trading. The solutions are scalable into the tens of thousands of customers. 2. Who Are We? Management The Company s operation managers have been largely provided by Tradition North America (TNA) through direct involvement of key principals as well as through the appointment of directors. In early 2004, TNA invited Mr. Joseph Botkier, a well-respected retired banker with extensive international banking and FX market experience, to assume the day-to-day executive management of the Company in a bid to streamline the operations and to provide new leadership. For the five years since Mr. Botkier s appointment, the Company has grown by a factor of 20. The chairman of the Company and principal shareholder is Mr. Emil Assentato, a 30-year Wall Street veteran who also serves as the CEO of Tradition s North American operations. Mr. Lubomir Kaneti serves as the Company s chief operating officer and Dr. James E. Green is the Company s chief legal officer and managing director. Both Mr. Kaneti and Dr. Green have substantial executive operational experience in the foreign exchange industry. Mr. Shawn Dilkes is the Company s chief technology officer and oversees the Company s R&D efforts and overall trading platform integrity. Mr. John Corbett is the Company s director of marketing and supervises retail and institutional marketing campaigns. Mr. Timothy Garland is the Company s chief financial officer. Mr. Thomas O Reilly serves as our senior vice president of sales and manages the sales processes of retail and institutional clients. Mr. Robert McKeon is the Company s chief risk officer and manages the Company s dealing operation. Mr. Jim Trott, former chief dealer at the Bank of England from 1990 until 2001, serves as a special advisor to the Company. 6 7

5 3. Important Milestones 2008 Announces pending NFA approval 2008 Wins Best Arabic Platform at Middle East Money Summit Awards 2010 Wins six Traders Choice Awards, including Best Overall FX Broker 2011 Wins Most Transparent FX Broker at Middle East Forex and Investment Summit 2002 FXDD is founded by Tradition (North America, Inc.) 2008 Begins banking relationship with JPMorgan Chase and KeyBank 2009 Expands to new office in 7 World Trade Center 2009 Receives principle approval to open EU operation by MFSA 2010 Acquires MFSA licensing 2010 Offers institutional pricing and trading to clients 2011 Offers euro-based accounts 2011 Joins Dukascopy Bank SA in white label partnership 2011 Acquires Irish institutional broker Frontier FX 2012 Wins Most Trusted Forex Broker Europe and Best New Platform from Global Banking & Finance Review 2012 Wins Best Broker US and Best Trade Executions from World Finance 2012 Announces ISDA membership Live Trading Account Growth January 1, ,000 Live Trading Accounts January 1, January 1, January 1, ,000 Live Trading Accounts ,000 Live Trading Accounts ,000 Live Trading Accounts 8 9

6 4. Overall Market Dynamics The first companies to offer online FX trading in the late 1990s rapidly gained market share and the interest of the general public. Retail investors quickly responded to the multiple advantages and opportunities offered by the spot FX market as compared with trading stocks, ETFs, and futures. Competitive Landscape Size Growth Because the FX market is OTC based, it is hard to get a firm estimate for its actual size. The Bank for International Settlements in Zurich, Switzerland estimates the overall FX market s daily volume to be roughly 4 trillion USD [as of the latest study published in April 2010]. According to the same study, the daily spot FX volume is approximately 1.3 trillion USD and the volume of trading with non-financial customers is 527 billion USD. Of that 527 billion USD, FXDD estimates the share of the online retail FX market at billion USD per day. The global liberalization of FX controls, coupled with the explosion of international trade and compliance by increasing numbers of countries with World Trade Organization guidelines, is creating growing opportunities for FX trading. Increasing global financial integration, propelled by advancements in information technology, is not only making access to the currency markets available to financial institutions and large corporations, it has facilitated the fastest growing sector in the market: medium and small businesses. and individuals. Spot Foreign Exchange and Market Derivative Turnover FX Swaps In trillions of US dollar equivalents Forwards Currency Swaps FX Options 72% 20% 4 3 FXDD ranks within the top 5 US-based FX brokerages in the space and within the top 15 internationally. FXDD s biggest domestic competitor is FXCM (Forex Capital Markets LLC), which is roughly 10 times the size of FXDD. Other domestic competitors include GAIN Capital Group (with its division, forex.com), FX Solutions, and several others. Among the international competitors, most prominent are Saxo Bank from Denmark, CMC Capital from UK, OANDA from Canada, and ACM, MIG, and Dukascopy from Switzerland. Most of the competition provides access to the spot FX market via trading platforms that are the same or similar to those offered by FXDD. As is customary among the biggest FX dealers in this space, FXDD also has its own proprietary platform with back-office capabilities. FXDD also uses additional platforms that have an established following among the international customer base. The FXDD advantage is that all risk is centralized in our proprietary back-end and is managed from there in real time. Moreover, FXDD has a deeper operational experience with the nonproprietary platforms than most competitors. 52% 29% -19% 56% 2 45% Percentages denote growth since previous survey. Source: BIS Triennial Surveys, FX Committee Survey Volumes In trillions of US dollar equivalents Oct 04 Apr 05 Oct 05 Oct 07 Apr 08 Oct 08 Oct 10 Apr 11 Oct Apr 06 Oct 06 Apr 09 Oct Apr 07 Apr FXJSC London Source: FX committee surveys FXC New York SFEMC Singapore TFEMC Tokyo AFXC Australia CFEC Canada The Company s informed view, the growth of the retail FX market is still in its initial phase both in the United States and abroad. This is why FXDD is moving quickly to position the Company to take advantage of expected growth in the FX space

7 5. Target Market and Objectives Mission statement To empower individual online traders by delivering innovative new technologies backed by world-class support. FXDD offers access to the online spot FX market for retail and institutional traders. FXDD strives to provide a very high quality of service through: highly competitive pricing (spreads) on a wide variety of trading pairs (33 at present), the ability to trade precious metals (spot gold and silver), different top-notch trading platforms (7 retail platforms featured at present), multilingual customer service (13 languages supported), fair trade issues resolution, and the dedication to continuous customer education. These advantages allow the FXDD sales team to easily convert a higher number of leads into accounts and increase both the overall customer satisfaction and the average account life. In the mid- to long-term, FXDD plans to widen its product portfolio and actively seek additional market niche including branching into the FX forwards and options markets. Currently, the ratio between US and foreign customers is approximately 20%/80%. FXDD has good domestic market penetration. However, as FXDD grows, the balance between domestic and offshore clients is moving heavily in favor of offshore clients. This trend is being helped by the addition of highly successful foreign introducing brokers (IBs). The largest potential pool of international customers is from Southeast Asia, which accounts for approximately 75% of all international accounts. In addition to Southeast Asia, FXDD is gaining increasing market share in other areas known for a large concentration of customer pools, including Russia, the former Soviet republics, the Middle East, Latin America, and Japan. Tapping into those markets helps expand FXDD s customer base and spreads FXDD brand into new territories. This expansion also creates the ancillary benefit of diversifying market risk across a more diverse customer base, which will help insulate FXDD from adverse market risk, as well as protect against adverse changes in sovereign regulations, which could inhibit FXDD from trading particular currencies. FXDD has established dealing operations in multiple financial centers to meet the needs of its increasing international customer base. This is standard practice among companies from the sector as well as many other retail-oriented financial institutions. The Company has established operational centers in Europe and Southeast Asia, and will potentially expand to other locations in the future

8 For each of those locations, the Company envisions a dealing operation whose initial size may be small, but whose size can increase rapidly as the business grows. The Company would operate on a 24-hour basis and would provide services to the existing client base and to new clients from around the world. The Company would also rely on the experience of the New York operation to provide services and support to the new company on an outsourced basis. Trade Photo 6. FXDD Highlights Differentiators Over the years, FXDD has built a strong and capable IT team. Most of the development work is done in-house to ensure self-sufficiency. In the first several years of operation, FXDD relied on an external development and support team provided by ATG in St. Petersburg, Russia. However, it became clear that operational realities dictated that the IT team should be in-house to ensure quick reaction to the business demands, facilitate easier communication, shorten the timeline from development to implementation, and protect against commercial blackmail in which a sole outside technology company providing mission critical solutions could engage. FXDD houses its core hardware and network resources in three locations. All hardware and network components are placed in a dedicated data co-location facility; some hardware and network components for development environments and test systems are in New York (USA), whilst the third site is a separate disaster recovery facility where operations can be resumed in minutes in case of a catastrophic event or any other issue with the main office or the main data facility. All of our software is built with a very high degree of reliability and redundancy and meets or exceeds standard enterprise-level thresholds. We have refrained from putting blind trust in external black box applications or solutions. Wherever we use these applications, they are backed up by our own core data and processes. In production, FXDD uses the Oracle database and WebLogic for our clusters of servers. We submit all our software to the latest upgrades on a continual basis, thereby ensuring that our licenses are constantly renewed. FXDD s services are streamlined. All customers are trading with a collateral margin deposit that is held by a known international bank, which at this time is KeyBank. Because all trades are non-deliverable, all positions opened by a customer have to be closed with FXDD. If positions are held overnight (or longer), FXDD automatically applies rollover debits or credits to the accounts. FXDD s system liquidates customer positions before an account s equity is depleted. This feature ensures that customer accounts do not end up with a negative equity balance. The biggest share of our revenue is generated by capturing the bid offer spread on accumulated customer positions. In the past three years, this strategy has been very successful for us. Although accumulating customer positions opens FXDD to market risk, managing this risk is under the direct supervision of our CEO, Mr. Joseph Botkier. As articulated above, FXDD uses a series of risk reversal option strategies that should be more than sufficient in minimizing adverse market movement. If our option strategy at a particular moment is not sufficient to ensure the commercial viability of FXDD, we have the ability and capacity to liquidate positions very quickly. Technology Process/ Experience 14 15

9 Scale At present, FXDD has approximately 250,000 accounts, of which more than 100,000 are funded. On an average day, 10,000-12,000 accounts are active and either execute trades or carry open positions. Our systems handle between 160, ,000 trades each day. At times of high volatility, for example, when nonfarm payrolls are publicly announced, it is not unusual to experience a sharp spike of activity 5-15 times normal volumes. Based on these numbers, FXDD is confident that our systems can handle a two-fold increase in the number of customers and average trades, which we expect to reach within the next 6-12 months. That being said, FXDD is constantly working to improve our technology, to enhance its reliability and redundancy and to ensure it will support our growth far into the future. The Company currently employs more than 180 people internationally across multiple shifts from Sunday afternoon through the market close on Friday afternoon, New York time. FXDD provides customer and technical support in 13 languages and continues to increase its multilingual capabilities. Brand FXDD is continuously working to build its own brand in the global market. We realize that in an environment of relentless competition, the FXDD brand and the goodwill it engenders will play a key role in distinguishing our competitive advantages, keeping customers loyal and ultimately driving more sales. We are in the process of protecting our name and trademark in all major countries and regions of interest. FXDD strives to provide a first-class experience for all of our clients without regard to the particular account size. We have always paid close attention to client requests and recommendations and to enhancing the relative competitive value of our Company in the global FX sector

10 CONTACT FXDD: MEMBER, MFSA. CATEGORY 3 INVESTMENT SERVICES LICENCE No IS/48817 Licensing statement FXDD Europe: FXDD Malta Limited is licensed to provide investment services by the Malta Financial Services Authority. Registered office: K2, 1st Floor, Forni Complex, Valletta Waterfront, Floriana FRN 1913, Malta HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions. Copyright FXDD 2013 V M