The latest firm to jump on the social trading network bandwagon is US-based company FundSeeder Technologies, backed by industry veterans including the author of the Market Wizard series, Jack Schwager.
Fundseeder's product ranks traders, a core aim of social trading networks. Past performance is recorded and analyzed, and that data is compared against other trader's performance, and on many quantitative levels with regard to risk/reward rankings.
How companies go about the often complex process of sifting through traders to find those who actually have inherently good habits and talents with results that correspond, versus luck or random trading results, is the crux of the challenge in running a successful social trading network.
According to Fundseeder's website, in some cases clients can import their trading history, such as is allowed with MT4 accounts, thus allowing a backfill-bias, but the firm makes it clear that it doesn't allow hypothetical results (i.e. demo accounts or backtesting), and only uses real live accounts that can be tracked by its platform.
Qualified Investors Sought
An announcement was made through the firm's sister company FundSeeder Investments LLC earlier - which revealed a new product line today - aimed to help match investors with talented traders, thus complementing its social network of traders, offered via its affiliated business FundSeeder Technologies.
The Connecticut-based firm, under the name FundSeeder Investments LLC, is a Commodity Trading Advisor (CTA) that is registered with the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC).
After just receiving NFA approval last month, and more recently as a Forex firm as well, according to information on the NFA website, FundSeeder launched the new offering aimed at qualified investors and also filed a 4.7 exemption for its regulated business.
Two of the questions asked on the new site fundseederinvest.com, aimed at regulated traders:
- Are you an accredited investor in accordance with Rule 501(a) of Regulation D of the Securities Act of 1933?
- Are you a qualified purchaser under the exemption provided by Section 3(c)(7) under the Investment Company Act of 1940?
It would make sense that anyone that didn't meet these definitions could go to the sister company as a retail trader, so it appears, whereas traders that qualify to be considered regulated investors could get some of the benefits afforded by the new launch, such as assistance in curating traders from within the social network- not always an easy task on any social Trading Platform .
Retail Offering Via Sister Company
On the website dedicated to the social product, the company lists that it works with four brokers that clients can link their trading accounts to, including Interactive Brokers, Tradestation, nearly any MT4 Account, and futures’ FCMs that use GMI back-office processing.
The difference between both entities seems that one is for retail and to aggregate and rank traders, whereas the other entity aims at raising funds from qualified investors, yet could be complementary if the traders from one side can be matched to the investors, such as using a letter-of-direction, as an example.
While social trading and robo-advisory is becoming more popular on the securities side, it has been around in futures and forex for a decade or more, but remains relevant. And following Currensee's acquisition by Oanda, which is also a US-based CTA, and more recently eToro's deal with a large bank in Russia, the FinTech convergences with robo-advisory and social trading networks may help to give both a boost.
