Two decades marks a landmark anniversary.
And while a lot can happen in just a few years, 20 could see landmark changes that can be more revolutionary than evolutionary. This year marks the 20-year anniversary of FXCM, also known as Forex Capital Markets, a retail broker for trading on the foreign exchange market and Chief Executive Officer Brendan Callan shared his views on the company’s changes and challenges it has overcome over the past two decades.
Callan has been the Global CEO since 2017 but has held various positions within FXCM for fifteen years. As such, he has been at the forefront of industry developments and overseen the development of the FX market and FXCM. The firm has recently added to its retail offering, introducing cryptocurrency baskets which streamlines the crypto trading process and protects traders from unanticipated market movements.
The institutional arm of FXCM offers tailored execution and liquidity solutions for retail brokers, hedge funds and emerging market banks. FXCM also has a Data division that provides powerful market insights based off executable pricing and real client trading behaviour. The platform is simple and straightforward to use, which saves valuable developer time and cost with the offering of price bundles.
Traders Magazine: Recall for us the changes in the company stemming from inception to now?
Brendan Callan: We’ve come a long way since our inception in 1999. Back then, the widespread adoption of the internet started a new revolution in online trading and traditional barriers to entry for traders disappeared and costs fell substantially.
During the 2000s, we focused heavily on developing cutting-edge technology and providing advanced educational tools and market insights to help our clients make informed trading decisions. These were key points of differentiation for our business. As part of this we launched DailyFX, which grew to be a popular information source across the FX market.
We stepped up our global presence in 2010 with the purchase of ODL – which I led. This eventually led to FXCM entering a period of sustained growth and we became and still are one of the best-known retail brokers globally.
Over the last decade, we have diversified our business and the client we serve. Our institutional business, for example, serves small and emerging market banks, hedge funds, family offices and proprietary trading firms around the world. We also co-founded FastMatch, which was recently sold to a major exchange for a multimillion-dollar sum.
The period after SNB decision was a setback for our business and the wider industry but I am proud of how we bounced back. Today we are a multi-asset broker serving over one hundred thousand clients in the retail and institutional space. Our product suite includes FX, metals, oil, indices and more. We recently expanded into cryptos and are investing heavily in technology and data.
Our business is twenty years old, but we are entering a next phase of our growth. Three years from now, I expect we will be a very different business to what we are today.
TM: Can you discuss the inclusion of crypto in the firm’s “basket” concept and how the firm strives to protect these investors?
Callan: We are focused on offering our customers some of the best possible trading opportunities across different asset classes, so expanding to cryptocurrencies (cryptos) was a natural step for us.
Trading cryptos using the incumbent model of exchanges comes with inherent risks. Traders have to buy the physical cryptocurrency and store it in an online wallet and they are not offered any regulatory protection if a wallet is hacked – the trader loses everything. Several high-profile cases of hacks have already occurred where millions have been lost with no restitution for those left out of pocket.
When retail clients trade crypto CFDs with FCA-regulated brokers like FXCM, their funds are held in segregated bank accounts. There are no hassles with wallets – FXCM deals with everything to do with the back-office so the trader can concentrate on just trading cryptos. We are also subject to a pricing and execution framework governed by strict regulation.
Our crypto basket, CryptoMajor, groups Bitcoin, Ripple, Litecoin, Bitcoin Cash and Ether into one tradeable product. The advantage of baskets is that you do not need to pick a specific crypto to trade – you just pick the direction. If you think cryptos are undervalued and poised for a rally, go long. If you think tough times are ahead, go short via a crypto basket.
Unlike other cryptocurrency baskets, CryptoMajor gives equal weighting to each coin in the basket. This means the trader is not overly exposed to just one cryptocurrency.
Investors should remember that cryptocurrencies have a higher volatility than other products and market liquidity will fluctuate, which could result in jumps in price and slippage.
TM: Review for us how has the FX market changed over time? Has been an electronic revolution or a human one? And what about the growing usage of algorithms?
Callan: Automation has transformed the market over the past two decades. Trades are executed faster, the nature of participants active in the market is no longer restricted to big banks and there are vast amounts of information that need to be processed in order to make the best trading decision.
The rise of algorithmic trading is a natural consequence of this, and has largely been positive for the industry. A large proportion of our clients now trade via algorithms and automate their buy and sell orders, risk parameters and execution strategies. Different traders have different preferences, so it is vital that we provide a range of execution options to suit their requirements.
This is particularly true for customers that use sophisticated algorithms to trade. We’ve added new capabilities over the past year to make algorithmic trading more convenient and easy for integration into our platform. This includes the launch of the REST API and Python Wrapper.
Does this mean the role of humans is coming to an end? No, it is not a view I subscribe to. If algo’s are driving up trading volumes it’ll mean they’re also driving down spreads which is good for everyone, including manual traders.
TM: Discuss the role of data in FX trading. In equities data is considered the lifeblood of trading – is it the same in FX? What data do traders need most? And is speed a factor like in equities?
Callan: The very good news is that price data in FX is free! The futures and stock exchanges charge an arm and a leg for their real-time and historical data and if you want to trade the international markets, you have to pay for each one. You cannot build a trading algorithm without pricing data. Because we supply it for free, FX is a popular place for algo traders as they don’t have to rack up thousands in data costs just to start tinkering with a trading strategy.
We offer a wide variety of data packages, including free tick-data that aggregates the best bid and offer for the most popular currency pairs from FXCM’s liquidity providers, and historical data, which allows clients to back-test algorithmic strategies and create models with precision.
We also offer Premium Data feeds for a small subscription cost. Our Speculative Sentiment Index provides the ratio of longs to shorts in our client base. We also offer premium streams for volume and trade tape data, which are available in a live stream via an API.