MahiFX will be globally rolling out from February 2012 a new trading platform for retail foreign exchange (FX) traders, which promises to deliver the speed, competitive rates and reliability normally reserved for institutional users.
The new offering comes at a time when currency trading is quite literally booming as more and more ordinary people get involved. The Bank of England’s foreign exchange joint standing committee recently showed a staggering 23% increase in UK currency turnover between October 2010 and April 2011.
But being a successful currency trader does in part come down to the tools used, not least the trading platform where attributes such as robustness and reliability are crucial and that will be one of MahiFX's selling points, according to its founders. It will effectively offer to small traders also known as retail traders in the industry, a platform designed to satisfy the demanding requirements of financial institutions, such as banks and insurance companies.
Unlike many Internet-based foreign exchange platforms, which often rely on third party software products or that aren't fully automated, New Zealand-based MahiFX has designed its offering from scratch and uses its own unique proprietary technology to deliver a fast, but reliable trading experience, its founders said. It can also adapt the platform's functionality to ensure it always has a competitive offering in the market.
It will offer very competitive buy and sell spreads on 200 currency pairs, such as the Euro versus the US dollar, but more importantly those spreads will be consistent. “There won't be 'from' spreads. We form our own rates and so can control their quality. It will be very much the exception that we are wider than our published base spreads” said David Cooney, one of the co-founders of MahiFX. What that means, baring intense volatility, traders will know exactly what buy and sell prices they can trade currencies at during specific times of the day. Also, there will be no commissions on trades. It plans to later add currency options.
Driven by automation
And automation is at the very heart of what drives this offering. Not only does it mean instant execution of trades – one of the greatest fears for currency day traders is for their orders to hang or be delayed, which can cause losses as prices change constantly – but also lower costs.
Fast execution also results from the fact that MahiFX will be a market maker, rather than a broker, meaning that they will absorb the risk directly into their portfolio rather than passing it on to another party. “Through 100% automation and by being a market maker we effectively cut out that level,” Cooney said. “Also, by being a market maker, we can avoid the need for any mark up on spreads.”
There will be no minimum deposit requirement for traders becoming MahiFX clients, which will effectively open up the platform to a very wide audience. “The cost of accommodating smaller traders is more or less the same as for bigger ones. So why not welcome them as well?” asked David Cooney.
Like many other currency trading platforms the MahiFX offering will come with trading tools such as charting software, but will also offer something extra. “We will offer tools to enable informed trading,” said Cooney. These include volume and volatility measures, which are often vital to figuring out whether a price move has 'conviction' because there's heavy volume behind it or whether it might just be a false break-out in thin trading.
Similarly with some currency brokers, MahiFX will also offer practice accounts and educational tools so novice traders can perfect their trading skills and strategies without risking their capital.
The two founders of the business, David and Susan Cooney, have strong backgrounds in the currency market from having worked for a number of investment banks. Both ended up working at the UK's Barclays Capital (Barcap) as it was pursuing its highly successful strategy of becoming a leading foreign exchange trading bank.
“When we joined Barcap (2004) the e-FX space was fraught with inconsistent buy and sell prices and unstable trading platforms, which earned the distrust of institutional clients,” said David Cooney. In response to this, he said the team he worked with built a robust, reliable trading platform and pioneered precision pricing for currencies, a significant industry development at the time, which became an industry standard.
It is with this experience and knowledge that the Cooneys decided to engineer a trading platform for the use of retail traders, but built to a level of reliability and solidity that institutional clients would expect.
A boom market
Though foreign exchange is a mature market it is an activity that has been growing strongly recently. David Clark who chairs the UK-based Wholesale Markets Brokers' Association wrote in an industry publication called FX Week in September that the explosive growth in UK currency trading activity was partly down to an increase in the number of retail traders. “The steady surge in retail FX and the number of aspiring new entrants is a development that has long been expected, and is likely to be lasting,” he wrote. He said this was due to regulatory reforms making it easier for people to set up trading accounts and due to volatility created by events such as the Eurozone crisis.
And it is a view confirmed elsewhere: “The amount of trading occurring through these 'FX firms' continues to grow by leaps and bounds worldwide,” according to a recent report called: 2011 and beyond: the Forex industry comes of age by FX research firm, LeapRate. The authors attribute this growth to cheaper and faster broadband access and the 24-hour nature of foreign exchange markets,
The report said daily turnover globally in the foreign exchange market is around $4 trillion, making it by far the largest market in the world and dwarfing the stock market where combined daily turnover in shares is probably less than a $1 trillion.
“LeapRate estimates that online FX volumes currently total about $185 billion daily, or about 4.6% of the overall global FX market,” the report's authors wrote. “Nevertheless, this represents tremendous growth, from under $10 billion per day 10 years ago.” LeapRate said 85% of all trades are currency pairs that involve the US dollar and Europe accounts for over half of all FX trading.
