LeapRate interview… Leaprate met with Stavros Lambouris, CEO at global forex broker HYCM International to speak about the rise of retail trading and how HYCM responds to this trend.
LR: Hi Stavros and thank you for joining LeapRate today. Much has been made of the rise of the retail trader lately; what are your views on this phenomenon?
Stavros: I think in many ways the pandemic was the perfect storm; the uncertainty, the massive sell-offs across markets, vast swathes of the global population stuck at home watching their prospects and plans for the year ahead disappearing. Traders are naturally attracted to volatility, but it was the combination of volatility and almost everything trading at a discount, as well as all that free time everyone suddenly had, that brought so many new participants in.
Of course, it should be noted that retail trading has been going from strength to strength for decades now. The work the retail FX industry has been engaged in since the early 2000s, to educate the public about financial markets and to make them accessible to everyone, was in many ways the first step to the sort of mass adoption of trading we’re seeing today. Then, you also have to credit the crypto boom over the past decade or so for bringing completely new demographics in. The twin trends of ever-increasing accessibility and financial literacy have been there for a long time. It just took a huge catalyst like the pandemic to switch all these new participants on.
LR: Do you have any concerns about this new breed of trader having easy access to and influence over the markets?
Stavros: I believe that more accessibility is par for the course in the information age. We saw it happening to many other industries before it reached finance: publishing and music, to name two. Right now, the public is very taken with the David and Goliath aspect of the GameStop story; they’re enjoying the schadenfreude of watching these hedge funds receive bloody noses from the little guy. But, there are broader systemic issues to consider.
For one, part of why retail was able to exert such an outsized influence over the past year was the predominance of passive investing strategies in the institutional space, as well as an overcrowding in the consensus trades of the active managers. Then, you also have the fear that if the WallStreetBets contingent has its way and forces institutional short sellers to exit the arena, we’ll end up with a far more fragile market structure as a result. Keep in mind, in a falling market sometimes short sellers are the only buyers buoying markets up as their very act of taking profits acts as a support; this dynamic is crucial.
If we’re talking about our concerns specifically for the retail trader, then all the relevant caveats must be mentioned. Retail traders routinely take more risk than their institutional counterparts, they overtrade, they tend to chase asset bubbles and sell on corrections. The only difference is that in strong bull markets like the one we’re living through right now, this behaviour can, at times, be rewarded and may lead a trader to take unsubstantiated risks due to a false confidence in their abilities. Now, while there’s not much any one person or company can do to stop this, at HYCM we have developed a culture around how to support traders from the first stirrings of interest to the point at which they feel confident to go it alone in the world’s markets.
LR: How is HYCM positioning itself in a world of zero-commission brokerage apps?
Stavros: HYCM has been at this for four decades now. We’ve worked for and with at least two generations of retail trader and are currently preparing the ground for the third. For us, our heritage and long history of working with both institutional and retail traders informs the way we support our clients; this is very important to our company. We continue to invest in and focus on our company’s three core tenets of execution, solidity, and support.
As far as execution is concerned, we have no interest in jumping on the zero commission bandwagon. We’ve all learned that there’s no such thing as a free lunch over the past few years. When you receive something for free, more often than not you’re the product. We’ve seen this in everything from social media, to our web browsing habits, and now in the world of finance. Unlike many of the zero-commission brokerages out there, we’re not in the business of selling our order flow to anyone. So, yes, we do charge commissions, but we get to stay impartial as a result of that choice and our clients enjoy excellent trading conditions that include great liquidity, low spreads and sub-10ms execution times.
On the solidity front, our group has been in business for forty years, so we’re not just here to make a splash in 2021 and disappear from memory by the middle of the decade. I think this is part of what attracts our clients to us. The fact that we’ve been around for so long, that we’re backed by a financial giant in the Henyep Capital Markets Group, and that we’re regulated in a number of strict and reputable jurisdictions. Keep in mind that much of the controversy around the halting of trading around those meme stocks was ultimately down to LPs raising margin requirements and the brokers not being sufficiently capitalised to post that extra margin. HYCM’s clients know that their capital is safe, that they’re dealing with a long-standing and prudent entity that has financial backing and no need to change the rules from one day to the next.
LR: Can you tell us a little more about HYCM’s specific approach to guiding new traders on their respective journeys?
Stavros: We’ve developed a culture at HYCM of supporting our clients every step of the way. This includes everything from the very basics of how markets work, to more advanced material on subjects like interest rates and bond markets. For this sort of material, our HYCM Lab blog is the first port of call, and you’ll find everything on there from educational material and opinion pieces to news and analysis.
Then we have our free weekly webinars and workshops with Giles Coghlan, Chief Currency Analyst, that require a little more participation from our clients. These really give people an opportunity to dig deep in various areas of the trading landscape with some guidance. We’ve had a great deal of positive feedback from these, and there’s a community developing around them that spills over into our other efforts.
We also do extensive social media outreach on all of HYCM’s official channels so traders can keep up with the latest market moves, including both open and private groups on Telegram which have garnered a great deal of community support.
Beyond all the efforts I’ve just mentioned, we also offer one-on-one expert private coaching, bespoke trading strategy reviews and access to professional tools such as Financial Source and Seasonax, as well as guidance in how to get the most out of them, allowing traders to boost their trading performance.
At HYCM, we’re not in the business of here-today-gone-tomorrow, and I think the manner in which we support our traders attracts clients that are of a similar mindset. It’s immensely gratifying to watch newcomers learning the trade while knowing that they’ll be with us for many years to come.
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Disclaimer: The content of this article is sponsored and does not represent the opinions of LeapRate
High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.
