I had the chance to speak with Michael Cairns, CEO of FX Solutions. In the interview below he speaks about the company, fixed spreads, plans for the future and how markets and regulation impacts brokers and more.
Regarding market volatility, Cairns stated that it is cyclical, and that there are always opportunities. I spoke with him before the recent market storm, and Cairns words certainly echo now.
Can you tell us about FX Solutions?
FX Solutions is in operation for the 11th year, since 2001. In 2008, City Index in London bought the company, and since then we are part of the City Index group.
FX Solutions is licensed in the US, UK, Australia and Singapore, with a very clean regulatory record. One advantage of being part of the City Index group is high IT resources and the ability to deliver different products to different jurisdictions, such as offering CFDs outside US market.
City Index is owned by IPGL, a private company owned by Michael Spencer. The IPGL umbrella encompasses ICAP, owner of EBS – the largest single platform in the world.
Because of this relationship, FX Solutions has direct access to the raw EBS price feed, which is used in the pricing for FX Solutions clients. The accuracy of the pricing is a significant advantage for the brokerage firm. Cairns states that “we are very confident that our clients are seeing the true price at all times”.
Another advantage is that FX Solutions maintains a fixed spread at all times (such as 3 pips on EUR/USD), regardless of market conditions, and different from some competitors.
FX Solutions was able to maintain the same spreads also during the big financial turmoil that followed the collapse of Lehman Brothers. Cairns recalls that a major international bank called him and wonder how they do it. Also in the recent interventions by the SNB and the BOJ, spreads were left untouched.
This is a key advantage for clients, which know that the company they are trading with is giving them the true market price. The fixed spread allows clients to know exactly what they’re going to get in at, and what they are going out at.
Cairns says that some brokers offer a 1-2 pips spread, but this is not guaranteed at all times: a traders might want to exit a winning trade only to find that the spread has widened to 7-8 pips and that his trade profit is gone. The low spreads can appear only a few times during the day and that no maximum spreads are guaranteed. Average variable spreads tend to be closer to FX Solutions fixed spreads.
“Over time, we have the lowest effective spreads”. Cairns is confident in the fixed spreads model.
Question: Volatility has been low of late, especially in EUR/USD. How does that impact your business?
Cairns: In the all the years with FX Solutions and beforehand for 15 years as a trader, I’ve seen markets come and go: volatility comes in cycles. We are not in different times. The current situation in the euro-zone, coming from Greece, Spanish banks, Italian banks and even Ireland can stir the markets.
Volatility certainly supplies more opportunities to profit (and to lose) and these opportunities will come again.
Question: FX Solutions offers both a proprietary GTS and MetaTrader. Which one is more popular?
We are seeing a good mix of both, and working on new products that will be out in the next few months. MetaTrader has a very widespread following, mostly due to the Expert Advisers (EAs). MT4 is the platform of choice for those who want to run a program, not worry and walk away.
For more serious traders that look at trading as more of a hobby, GTS is the choice. The charting in GTS is one of the best, most detailed and more comprehensive charting packages out there.
The more professional types of traders that want to trade themselves chose GTS. SmartMoney Magazine (owned by WSJ) named FX Solutions as the “overall best broker” for experienced traders in 2011.
Questions: Does FX Solutions provide mobile trading?
Answer: Yes. iPhone apps for both GTS and MT4. An Android app is available only for Metatrader. The usage of mobile phones and tablets is growing fast. In a few years, people won’t be on laptops, but rather trade on tablets or on phones.
GTS is being developed also for the iPad. I’ve seen things change dramatically in the past two years towards the mobile. A lot of similar companies are allocating a lot of resources towards perfecting these applications. We are aiming to make it seamless for users to use the apps, independent of the carriers and the devices.
The GTS iPhone app is very detailed with charts and multiple languages. This is becoming popular in China and the Middle East.
Question: How does regulation impact the business? Is it a burden or is it necessary for separating the good brokers from the bad ones?
Answer: We are very strong advocates of regulation. Clients worry about the safety of their funds after the MF Global case.
It is often too easy for a company to purchase a MetaTrader license, set itself as a broker and register in some remote location. That comes with a price: if something goes wrong, you have no one to fall on, such as the American NFA and CFTC, or the UK’s FSA. There’s no safety net. Clients and potential traders need to be aware of this.
We have no problem with regulation. The US has made massive changes since we started. Smaller companies have gone to the wall because of insufficient minimum capital requirements. Very few companies can actually afford these.
The NFA regulators barred a lot of the smaller companies. They weren’t necessary all bad. I actually sat before the CFTC before they made the 50:1 leverage rule and reminded them that we do so much due diligence on our clients. The last thing that is wanted is regulating the FX Solutions, Gain Capitals and FXCMs out of existence and have online companies bombard the US from overseas and having US clients signing up with these companies.
Regulators walk a fine line between over-regulating and sensible regulating. I think that in the US the situation is OK now.
Question: In the past year or so there were some management changes reported. Can you tell me more about that?
Answer: I have actually always been here. I am a managing director for City Index in the UK, CEO of FX Solutions, responsible for the Americas and Middle East. Regardless of what has been written, there has been continuity.
Question: What are the plans for the rest of 2012 and beyond?
Answer: We have grown our client base, revamped our websites and are planning to launch more products. We are focusing on more direct connectivity to our systems with APIs.
We are in the process of moving our data centers to a new state of the art data center in Florida this month. Coming with that will be upgrades to our software. More software is expected during the summer.
Technology is our focus. If you sit back and just expect people to come to you without innovation, be ready for disappointment. We have to remain relevant, and we’re doing it with mobile technology among other things.
Partners and IBs can take our price feed and flow, connecting it to their own front end, and let them send it to their clients. Also our customer service can be used by these partners.
Our focus has always been on the clients, providing them the best service. Our customer service is one of the best, if not the best.
Question: More and more brokers are offering social features, such as “follow the trader” features. Are you planning that as well?
Obviously we look at everything, but we have to be very mindful: in the US, we have to be careful about anything said on social media. Anything said on Facebook, Twitter, etc. can be treated as promotional material. We cannot provide specific advice, just tools.
We see a need for some to know what another trader does, especially in Europe and the Middle East. Such “Follow the Trader” features go hand in hand with the usage of smartphones – this new world of social grouping / social media is something we can’t ignore.
Anything else you would like to say?
We want to provide the best technology, execution, client service and get as many products as possible for clients – give them choice. It’s ever-changing and exciting and we are trying to evolve with the markets, using our vast experience. We stand up against anyone, holding our track record and our clean regulatory record, our compliance, and transparency.
We are here for the long run, not going anywhere.