Social trading networks have gained such popularity recently that there has been more than a degree of bandwagonism within what began as a relatively small, specialist sub-sector and has grown to become a mainstay of the retail FX industry.
Social trading and the following of other traders has proven itself to be an instrumental tool for retail FX brokers to engender broker loyalty as well as increase the lifetime value and trading volume of clients, especially if the clients concerned are new to FX trading.
On a region-specific basis, attitudes vary toward trading as an individual or as part of a group which can place trust upon lead traders within such networks. The Asia-Pacific region has wholeheartedly accepted social trading, with many traders in the region placing more emphasis on the credibility of a specific IB or lead trader than on the actual broker itself, and with so many firms wishing to enter the Chinese market, the establishment of a network aiming itself at China could indeed bode well.
Liga Forex , launched in September at the CIOT Expo in Shenzhen, China, is a social trading network which angles itself toward a predominantly Chinese audience, with its other target being Eastern Europe.
It supports Chinese Mandarin, Indonesian and Malay languages alongside Russian, Spanish, French, and Croatian, indicating the markets it seeks to gain prominence. In this week's Forex Magnates Executive Interview, Marshall Shrago, the company's Kuala Lumpur-based CMO outlines the parameters for consideration when establishing in this highly lucrative yet competitive industry segment.
In the days approaching the iFX EXPO in Macau, hot topics are abound.
Please detail the corporate structure of Liga Forex, and where it fits into the E-Global Trade and Finance Group entity.
E-Global TFG is currently running three projects: Forex4you, Forex4pro and LigaForex, all of which share the same legal entity, same compliance & legal departments, but different management, customer support and business development teams.
An interesting aspect of Liga Forex is the regional emphasis on Eastern Europe and China depicted by its language support. How important are those regions and what was the driving factor for concentrating on them?
We believe that these regions offer greater opportunities for social trading, given these people's strong engagement in online social activities.
Establishing a social trading network which is angled toward a Chinese audience is a bold move, as China’s government prohibits overseas companies to conduct business within its mainland, and similarly does not welcome joint ventures with overseas firms. On this basis, which companies are expected to take up the service to offer their clients social trading, and what type of retail FX trader is Liga Forex intended for, bearing in mind that many traders in China opt for mainstream overseas FX firms which use Tradency's Mirror Trader or ZuluTrade.
Liga Forex is intended for smaller retails clients, beginners, people for whom traditional platforms such as MT4 are too complicated. Moreover, we hope that in the future the Chinese government will liberalise the legislation in this area, making it possible to enter the Chinese market properly.
Chinese IBs and representatives often drive a hard bargain in terms of revenue share and commission. What is Liga Forex's strategy for attracting IBs in China to onboard clients, and how will the cost of this be kept viable?
We are starting with a more or less standard (in this industry) deal - we pay at least 50% of the spread back to the partner. Since our platform is much easier than our competitors, conversion rates are higher and thus we believe IBs can generate more sales with us.
As social trading and copy trading platforms have become de rigeur as a tool for retail FX brokers to attract more new clients, and increase trading volume from that target market, do you think that regulatory authorities will begin to consider the signal provider that users can copy, as a financial adviser and therefore, require all signal providers to be regulated as financial advisers?
That would certainly harm social trading as a movement, but perhaps only uber-strict governments like those of the US or Japan would make such a move in the near future. Moreover, if there is a reasonable amount of financial advisers in the community - it may not be a bad idea to require such regulation.
Over the last few years, an entire copy trading and social trading ecosystem has been built around brokers who use MetaTrader 4. Earlier in the year, MetaQuotes issued a warning to brokers against using social trading providers which has since caused many providers to go down the platform-neutral route. Do you see this as a disadvantage for Liga Forex, as the established copy trading and social Trading Platform providers now compete directly and are not tied to one platform?
There are many novice users out there, who don’t mind the platform name. It’s all about customer experience – how comfortable the platform is, how fun the social club is, and so on. We are glad to compete with other social platforms in this arena.
Subsequent to the MetaQuotes' warning to four copy trading providers earlier this year, how do you consider the social trading sector will evolve, and how will the increasing platform neutrality and co-operation with institutional firms as distribution channels affect Liga Forex, and how are these positioned compared to platforms distributed via B2B channels such as Leverate's Sirix social trading platform?
We believe there must be consolidation at some point - social networks are all about the size, when everybody is “there”– then you join it, basically. Consider Facebook, before it went big, people stayed on thousands of smaller forums and social networks. And today everybody is on Facebook because it’s convenient, because you know that “everybody” is there. We think the same thing will happen in social trading, in several years there will be a couple of de-facto largest social networks, and everybody will join them because all the best “gurus” - as well as your real, personal friends - are there. Our ambitious objective is to become one of such leading social platforms.
Does Liga Forex plan to concentrate on providing bespoke integrations with other platform providers and brokers, with their own in-house platforms in order to offer social trading as an integral part of a platform?
No, at this moment we don’t plan any such thing, because we think that we have to control the whole supply chain, from web front-end and mobile apps to market execution, in order to guarantee a quality product. We want to be held responsible for every aspect of customer experience – no matter how great or small.
In terms of cost model, Liga Forex social trading requires a different method of entry now compared with a few years ago, as retail FX is now a largely Direct Market Access business where spreads are low, and clients drive a very hard bargain in terms of cost of closing trades. How will Liga Forex be capitalized in such circumstances? With MetaTrader 4/retail broker partnerships, copy trading platform companies could charge 1 pip above standard rate for a dealing desk-based solution. How will Liga Forex make a profit, if spreads are so low and commissions cannot be increased?
We have several ideas in mind: offering premium, paid blog and signal subscriptions; special, premium membership plans; as well as traditional spread commissions. Since we expect many novice users opening long-term orders (weeks or months) with low leverage, we don’t think that spreads are going to play a big role. In other words, we would be able to charge higher spreads for, let’s say, CFD on stocks.
Marshall Shrago
CMO, Liga Forex
What is your opinion on trading platforms which have their own integrated social trading platform, as in the case of Leverate's BX8 binary options platform compared to using a separate, broker-specific platform with social trading network attached?
We think it has to be a fully integrated solution. Users want a simple, clean solution, not a bundle. Providing a trading platform and then a social network on top of it is a hassle for non-advanced PC users. The whole process, from registration to copying your first order from a great guy on another continent, must be straight-forward and comfortable.
What is Liga Forex's plan for the year ahead?
This year we will focus a lot on marketing, while still analysing feedback from our real users and adjusting the product non-stop. By the end of the year, we strive to be in the top 10 of social investing networks.
