How did HYCM start as a company in financial trading and then in retail Forex trading? How different is the company from what it was 40 years ago?
Who is your average customer from the trading behavior point of view?HYCM has a 40 year operational history offering a trustworthy and transparent online trading service to investors. We excel in providing traders with access to a first-class range of services via our state-of-the-art trading platform and mobile app and offering a full range of tradable assets. Over the years, we have consistently focused on quality customer service so our clients can enjoy one of the best trading experiences in the industry.
The company is part of the Henyep Group, an international conglomerate established in 1977, with businesses in financial services, property, education and charity and is regulated by the Financial Conduct Authority of the UK (FCA), a licence obtained in 1997, the Dubai Financial Services Authority (DFSA) in Dubai and the Cyprus Securities and Exchange Commission (CySEC). The company is globally represented with offices in United Kingdom, Hong Kong, Cyprus and Dubai.
In terms of how different the company is from what it was 40 years ago, there have been a number of changes and we have evolved in parallel with developments in the Forex industry overall. Over the years we have seen an increase in Forex trading which has, in turn, fuelled the growth in the number of Forex brokers, so there is now more competition in the market.
It is not only evident that the sector has become more competitive but client acquisition costs are also rising so we constantly have to look for ways to manage these changes and excel in an industry that is set to evolve even further during the next few years.
More industry regulations have also meant tougher guidelines and stricter enforcement and as with other industry participants, we have had to focus more on internal compliance and greater transparency — all to the benefit of our clients.
In addition, technological advancements have been a factor in the company’s growth and development and we have seen significant developments including those by our platform provider, MetaQuotes (MetaTrader) which help us meet our traders’ changing requirements.
Finally, the shift in trend towards mobile trading with mobile apps together with developments in online payments has also facilitated the trading process further and changed the way in which a large percentage of our clients trade.
You are regulated by both FCA and CySEC. What effect from the Brexit implementation do you expect on your business?Our customer base comprises both retail clients including professional traders and institutional clients.
Retail clients account for the individual looking to trade Forex and take advantage of the volatility of the markets. Some of these may already have a “day job” but choose to trade to boost their income. Professional traders on the other hand, work full time at Forex trading either in a private setting or within a corporate environment.
Our corporate clients are institutional clients utilising the Forex industry as a secondary vehicle to make a return on investment (ROI). Institutional clients looking to commence a company themselves can use HYCM’s white label solutions instead of starting from scratch.
Finally, we work with partners who have a large pool of networks and are seeking to capitalise on these connections by training and providing them with an introduction to HYCM, being a solid and reputable broker.
How would you compare regulatory environments in Britain and in Cyprus?Brexit has been one of the most discussed political and economic stories over the last year since the UK voted to leave the EU, and even though Article 50 has now been invoked, there is still some uncertainty regarding the impact Brexit will have on both the City of London as a financial centre and Forex brokers who operate from London and the ways their businesses will be affected going forward.
As we know, the main issue for financial services firms is the ability to passport, allowing firms in the EU that are regulated in one jurisdiction to sell their products across the EU, without the need to obtain regulatory clearance in every jurisdiction in which they operate. With Brexit, this could be in jeopardy.
As far as UK Forex traders are concerned, the issues facing them are perhaps more uncertain in terms of their investment strategies. While the UK government has made assurances to protect the British economy as much as possible following Brexit, no such assurances have been made to investors.
For HYCM, however, we anticipate “business as usual”. Being a multi-regulated broker, our European operations are governed by CySEC so we are already permitted to conduct business within the EU. We expect our UK business operations to remain unchanged and will continue with our plans to expand our footprint across Europe in response to increasing demand from the region.
What do you think about the latest developments in CySEC regulations?Both the FCA and CySEC are two industry-acknowledged regulators and both regularly issue new rules and guidance as the regulatory landscape evolves to ensure broker’s clients are protected and treated fairly.
Generally speaking, the FCA is known for enforcing stricter guidelines. Until recently, there were a few differences regarding deposits and withdrawals. For example, withdrawals have to be automated under the FCA and processed immediately in accordance with a client’s request. Under CySEC jurisdiction, brokers were permitted to process withdrawals manually and potentially delay payment, however, this is no longer the case. Today, a CySEC regulated broker must process the client’s request to withdraw funds on the same day that the request to withdraw funds was made, or the next working day if the client’s request is received outside of normal trading hours, provided that the cash balance in the client’s account is positive.
Similarly, as an FCA regulated broker, we are obliged to have segregated client money accounts with Trust status for our clients’ funds. The same rules also apply to our CySEC regulated entity.
In terms of having an FCA licence, the compliance procedure is still somewhat stricter than CySEC which has encouraged many brokers to seek CySEC certification first — although in our case, we achieved our FCA certification first in 1997 and we do see CySEC taking steps to increase its regulatory activity The new MiFID 2/MiFIR regime which will come into force as of January 2018 will have an effect toward this direction.
What are your plans regarding introduction of MetaTrader 5 platform? It seems to me that more and more brokers are offering it as an option to their traders.In terms of how CySEC’s recent developments have affected Forex brokers, we have had to adjust to the regulator’s tougher stance on leverage and bonuses.
As those in the industry are all too aware, some of the restrictions imposed by the CySEC have included prohibiting the promotion of bonuses, a significant limitation on leverage ratios and, as we noted earlier, allowing clients to withdraw funds on the same day a request is made.
The tool that was used to incentivise traders to trade is now gone, so we have had to adjust our marketing strategies with a longer-term focus in mind, paying more attention to payment structures and ways in which we approach conversion and retention. Nevertheless, having a seal of approval from a recognised regulator is a positive message for traders and an asset to us towards building long term client relationships.
More recently, CySEC has warned that it “may not allow marketing to countries outside the EU without legal opinion.” If this is confirmed, it could have a further impact on the Cypriot brokerage sector, favouring instead jurisdictions which offer more relaxed regulations. The temptation may be to focus on more ‘universal’ regulations but this would mean having to look for additional ways to handle non-EU clients from countries both with and without regulators. There are ongoing challenges which of course affect us, but do not hinder our plans for further expansion.
To me, retail Forex seems to be stagnating nowadays. What plans does HYCM have for innovating the industry?MT5 has experienced a slower adoption by traders than might have been anticipated largely because a large segment of the trading community have got used to the MT4 platform. When MT5 was introduced, the general feeling was that the MT4 already had everything needed to analyse the markets and trade, hence the slower uptake.
However, MT5 offers additional and more advanced indicators and features such as depth of market, aggregation of positions, more graphical objects and timeframes and more inbuilt indicators. As traders become more aware of what MT5 has to offer, they have started to embrace the enhanced features, resulting in more brokers starting to offer it as an option to their clients.
In terms of our plans regarding the introduction of MT5, we are shortly planning to integrate this into our trading infrastructure, thereby expanding the range of trading platforms offered to our clients.
If you like this interview with the CEO of HYCM or if you just have some comments or any ideas for the future interviews, please post them below. You can also read some other interviews with Forex brokers if you want.On the contrary, all the indications are that Forex trading is continuing to experience further growth.
If we look at the Forex industry on the whole, we can see how rapidly it has advanced in recent years, especially in response to the ever-increasing popularity of online Forex trading. This broadening of participation in the industry is illustrated by the growing number of Forex brokers that have ‘set up shop’.
The increased competition in the market is a reflection of this situation so I don’t believe the market is stagnating at all, but rather evolving.
However, increased competition and rising client acquisition costs are apparent and for these reasons, we have to constantly look for ways to deal with these changes and excel in an industry that is set to change even further during the next few years.
On the subject of changes, stricter industry regulations have also meant tougher guidelines and stricter enforcement and as with other industry participants, we have had to place a greater focus on internal compliance and greater transparency, but as I noted earlier, this will bring positive benefits to our clients.
In terms of innovation, technological advancements have been an important factor in the company’s development. We will soon incorporate MT5 into our infrastructure along with the introduction of variable spreads and the addition of some more exciting tradable assets including cryptocurrencies to our portfolio.
As the market continues to evolve, we will continue to adopt the latest technology in order to excel in this changing and challenging market.