As we have observed the European market declining significantly, especially in the current low volatility environment, regional diversification remained a key theme in the industry. China for years has been the most lucrative market for the retail brokerage industry, but after some changes brought forward by the country’s government, onboarding Chinese clients has become very hard.
We spoke to the CEO of one of the companies in the industry which is still strong in this market, AETOS. Draco Ng, elaborated to Finance Magnates on the state of the local industry and on the way which the company aims to remain relevant at a time when the industry is changing.
Mr Ng thinks that China is a better market environment when compared to Europe. Granted, he’s speaking with the experience of a local between the market environment in Europe and in China, doing business in China is better for us. We still see better client flow from the region because we have experience in the market.
Remaining Relevant in China
AETOS is an Australia-based brokerage company with Chinese management. Since the firm’s establishment, the company was focused on clients from China and in the last couple of years, its effort shifted into to getting its name out globally.
“Our offering is very much localized and we are adapting to the necessities of the market which we are targeting. In the case of China, that mainly includes understanding what the introducing brokers that we work with need in order to be able to work with us seamlessly,” explained Draco Ng.
The CEO of AETOS thinks that solid technology is the key success factor for retail brokers and for financial firms no matter where they are located.
Regulatory Changes & Challenges
Over the past year changes with the ESMA and in China have made the . Draco Ng’s experience in the local market which totals over 18 years makes him an expert.
“Rumors about China opening the market for retail FX brokers offering leveraged trading have been around for quite a while. To date, there is no regulation and the industry is in a grey area. However, this doesn’t mean that the Chinese authorities are aiming to close the market altogether. What I think is that the authorities are cleaning up the industry,” the top technologist and manager at AETOS elaborated on recent industry trends.
Mr. Ng’s experience is that what happened last year was particularly . The economic slowdown in the country and concerns about capital outflows in any way, shape or form have been at the top of the list.
“What the authorities are doing to compensate is to introduce tighter controls on pretty much everything to maintain stability. The Chinese government is actively managing its current account and has capital controls in order to limit outflows of money outside of the country,” said AETOS’ senior executive.
There is no doubt that the with cleaning up the market without wiping it out. There are still brokers that can have a good FX business in China, provided that it is done in the right way, without violating their customers’ trust, thinks Mr Ng.
As elsewhere, education is a major theme too. The company aims to provide its clients with adequate tools and is aware that educating clients is another major step which brokers operating locally need to undertake. In the mind of the CEO of AETOS, the FX industry will not be completely banned in China.
Technology Trends
Over the past 5 to 10 years, the main trend in the retail FX industry has been to provide the tools that were previously privy to institutional traders. Algorithmic trading and automated strategies are now commonplace in the retail world, but these tools have been at the disposal of institutional clients in the past.
“Nowadays the shift into AI-powered tools is gathering speed and we can see that every day in the market. The next logical step would be to bring that power into the hands of the retail trader,” says Mr. Ng.
There are many ways in which retail clients can make use of such products: from investment advice to the identification of toxic behavioral patterns that harm a trader’s decision-making process. In the views of the CEO of AETOS, AI technologies are the way forward for the industry.
“Robots using deep learning can access the data of the client and provide information on which are the biggest mistakes a retail client makes. They will also be able to teach our clients how to make improvements to their trading strategies. A robotic personal financial advisor will also be available at some point in time,” shared Mr. Ng.
We parted ways with Draco Ng as he re-emphasized that trader education is crucial for the industry, as it leads to a better user experience and customers that can be more committed to trading the market for a longer period of time.
“This is a much healthier and positive future for the FX industry,” concluded Draco Ng.
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