Social trading has become a vast phenomenon during recent times, particularly in an age in which retail FX brokerages are faced with extremely high client acquisition costs and low lifetime
values.
Today, LeapRate spoke to Daniel Pena, CEO & Founder of Perfectna, a new software as a service (SaaS) company due to launch its service imminently, which has been established in California, with the fundamental ideology being based on what the firm terms Echo-Trading.
“We started the idea for the establishment of the firm by winning business plan competitions in California. I started trading in 2003, and was concentrating on currencies but also trading equities” explained Mr. Pena.
“In my walk of life I met many people who claimed they were good at FX trading but really were not, therefore I decided to develop a signal providing system called Echo-Trading. The crux of it is based on benchmarking. We call the signal providers who have passed our benchmarking process Echo Leaders, and those who have not are termed Echoers” he explained
The firm operates a full white label solution, in which Perfectna can put a broker’s branding on the platform. “A broker’s brand is their intellectual property, they worked hard to acquire the cleints, therefore why would they want to put them with another company?” Mr. Pena opined.
“Where we are focused on from a business standpoint, is that after going through the process of becoming an introducing broker (IB), we decided that it was not worth it. We will not be able to do any better than the existing, established brokerages, therefore we concluded that it would be better to give them a pure technology solution and allow brokers to concentrate on their clients” said Mr. Pena.
“We believe in social trading” he continued. “New traders blow their accounts in the first four to six months, and brokers have to pay increasingly higher acquisition and retention costs. It is important to consider that retail traders fail not because of lack of information or training, it is simply down to experience and time. When you are a retail trader, you have other commitments.
you are not going to stay up all night trading in a competitive market. Our solution therefore empowers novice traders to pick and choose signals from those who have proven to earn profits with reasonable risk metrics.”
“The Echo Leaders are serious people who want to build a trader in a certain way. The key is to get rid of the old fashioned bricks and morter approach, therefore we can license the software to brokerages, and clients are able to jump on and become Echoers. Following this, those who pass the benchmark can ask the broker to be signed as an Echo Leader. If they earn money for clients, they earn a success fee” explained Mr. Pena.
In terms of platform diversity, Mr. Pena stated to LeapRate that “The Perfectna system integrates into a broker’s back office system, therefore whichever platform the broker wants to use will execute the same on the back end.”
“We want to increase retention” enthused Mr. Pena. “We also want people to enjoy the trading experience as well as to feel empowered.”
When asked whether he thinks regulatory oversight may become mandatory for social trading platforms soon, Mr. Pena stated that he can see it coming. “The National Futures Association and Commodity Futures Trading Commission both may implement regulations for social trading platforms” Mr. Pena said. “The Financial Conduct Authority just put some regulation on it, so it makes sense that others will follow. We will do what we can to remain compliant, however our goal is to provide the broker with the right tools from a technological perspective to support what we see as the future of trading.”
“We will license the software to the brokers which take it up, and charge a per-head fee per month to the broker, which will apply only to active traders. For example if there is 1,000 users and 500 users executed trades, then we would charge for these 500 users. Apart from that, there is a one-time set up fee. Depending on the length of the contract, the fee varies” he stated. ” This company is focused on software and therefore we are not taking the commission fees from brokers. Many brokers split commission, but they take all the risk. We can give good quality technology from one of the biggest tech hubs in the US, and therefore think it is preferable to concentrate on that aspect.”
In conclusion, Mr. Pena confirmed to LeapRate that the service will be launched within the next few months.