FXCM's CEO Presents at 2013 Citi Financial Services Conference (Transcript)

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FXCM Inc. (FXCM) 2013 Citi Financial Services Conference Call March 5, 2013 3:40 PM ET


Drew Niv – Chief Executive Officer

Unidentified Analyst

Quickly growing its institutional platform, become a meaningful contributor to the story. The trade environments were a bit pressured in 2012 just given the very low, historically low volatility as measured by the CIVX, and it’s done early since in January to the tremendous amount of operating volume leverage as CVIX normalizes to some degree. I hope to get a good update from management as we feel very fewer thoughts about 2013.

Today with us we have Mr. Drew Niv. He is one of the Founders and the Chief Executive Officer; and as well done tremendous growth in the platform. So Drew, thank you very much for joining us this morning and look forward to a great update.

Drew Niv

Thank you, Bill. Just a little bit of an overview of FXCM, as for those of you who are less familiar. FXCM was founded in 1999 by six partners. I’m sure it was built with no venture capital of private equity financing at all, six people throw their money until December 2010 when we raised some money within our ITL.

Primarily FXCM is a retail trading firm, serving over 175,000 customers worldwide, about 75% of our business and 25% of our business is institutional business.

I’ll just tell you a little bit about the retail FX market. The retail FX market is a relatively small, still a relatively small component, a fast growing component of the global FX market, it’s a $4 trillion a day market. Most people think it’s a largely a consumer money changing, a corporate money changing or people buying foreign securities that actually – all of that represents no more than 20% of the global FX market, and the majority of that is actually speculation done mostly by institutional trading.

As you can see on the chart here on the right, the retail FX trading for speculative purposes has grown, relatively fast in the last decade, and it’s something that has continued to be adopted worldwide. So it’s probably one of the most enviable things that we’re most proud of at FXCM is the fact that it is such a global market seen in the slide here.

This is by volume in billions in all sorts of the major geographies. And as you can see in most geographies, the market has grown fairly rapidly. Looking at a market that is – it’s probably number one asset that is consistently the same for every customer whoever they are in the world. One of the things that always hampers a lot of financial services firms is that, they have to localize our service for every geography they’re in. They have to localize the clearing, the trading, the instruments of research, all the value added around it.

The beautiful thing about FX where you’re – whether it’s a Chinese customer, whether it’s a Qu’aiti customer, American customer, French customer, they’re all trading the exact same instrument, exact same research, exact same clearing settlement trading that’s in platforms allow us to really have one big global platform.

There is one actually out of the United States to service the entire world, makes it as very, very scalable thing. The thing that also allows us to do is in the age of information, allow us to offer identical prices to customers worldwide, who look at, for example one of the biggest issues that in the age of the internet people have is that a fewer, a very wealthy, let’s say Chinese President and you went to a big institutions that I would like to have a private banking account, I would like to trade the U.S staff you would pay probably 10 times to 15 times for the U.S. customers pay.

And if you still go to Ameritrade or schwab or E*TRADE online and say, hey, those guys are saying a fraction when I’m doing it for a minimum of $1000 for instance. The FXCM essentially allows you whoever you are, wherever country want to trade on the same flag on the same costs, we treat every customer globally the same as we will treat a western customer which allows us to essentially have that differentiation in emerging markets in the fast growing where the wealth is growing as the emerging market is our 50% of our global audience.

A little bit about sort of work sets us apart. Most of the FX world being institutional or retail as a principal model based trading in the world is essentially a dealer to client relationship. That dealer to client relationship is essentially made fair in the institutional world, by institutions essentially dealing with many, many dealers, and essentially first in competitions by virtue of calling multiple dealers at the same time, a retail client, because they’re held in a non-tangible environment to the friends that they are dealing with, essentially they don’t have the benefit because of the lack of tangibility do not have the benefit of a multiple dealer environment.

Now laid off essentially with their counter dealer client relationship that is obviously perceived to be unfair, sometimes it is and sometimes it is not. This allows FXCM to have a big competitive advantage, because FXCM essentially took the – and changed the model to an agency model. Essentially, what we mean by agency is essentially we allow the retail client to have essentially the access to multi dealer pricing model in the same way that a big institution would essentially add official in force (inaudible).

Everything we have as you see in this slide essentially describe everything that we do possible on the fact that in the retail business, for example, all of the entire stack that you see, what the customer sees and what the customer doesn’t see from a trading going down to the exchange, the clearing house and everything else that we have to build, we have to build organically in-house for ourselves for most brokers in the exchange trade would say or essentially using pre-made parts outsourced to other institutions.

All of the parts here are built by FXCM. This allows FXCM to differentiate itself from its competitor in more than one or two ways. If you look at exchange trading brokers, they compete on commission, they compete on brand, they compete on value-added services. FXCM can actually compete on settlements and clearing and compete on execution speed, execution quality, all the things that the normal broker essentially outsources to other parts that are standing high.

One of the probably most impressive attributes about FXCM is half our business is the 175,000 asset clients. Although we have the direct clients of ours, the other half of our retail business is actually since we required the white label business – the while label business today is a few hundred and citizens, the majority of them we do not disclose are a bunch that I’m disclosing on the slide that we are allowed to disclose. It is a business where we essentially take our platform as a service, since we are in the ASP service model. And give that to other financial institutions, they can essentially run a retail effect.

To their clients without them getting with all the half of described for or potentially fielding their own clearing house foreign exchange on brokers current back office and the like. So you can see this is something that allow us to the brand we mentioned below and if look at some of the – so you meet opportunity as we do them we do this worldwide in lots of different countries that allow us to extend our brand to areas where we would not ever imagine how brand dominance organically and obviously includes in this country while this is getting great dominance across relates so much money. And this allow us to essentially extend ourselves way beyond what another cover up that we will be able to get.

We are about so just getting back to what Bill has mentioned in the beginning. The last few years have been remarkably tough, despite the growth in accounts and as I will show you later in assets. We essentially were facing an environment where the volatility has just steadily declined as it continues in a fairly dramatic fashion, actually in 2012, declines in a pretty significant way more than it has in recent history that has led to actually a pretty substantial slowdown in trading and substantial slowdown in participation by customers, retail FX customers essentially the interest of a retail equity customer.

So equity customer looking for comp fees and essentially a market that’s slowly and steadily moving up to look at a retail tough customer that’s largely at stay, a trade over volatility. And therefore, when volatility disappears, it disengages obviously quite the opposite from a retail equity trader engages in lots of volatility.

So for us volatility is obviously a good thing, as everybody in the call just has to know. That’s been, in the recent years, not a reference for stock whatsoever. In the last few months, obviously that has changed and we’ll go over that in a bit. To go a little bit over some of the opportunities for FXCM is, FXCM because it had a few tough years, has been in cost reduction mode and continues to be in cost reduction mode despite the last few months.

We’ve seen a turnaround in volatility only because the issue of how sustainable that volatility, turnaround is related to anybody’s guess. And so we receive a more longer duration or this would probably knock something on a cost reduction basis. We are the one piece of technology that was not in house both was in our institutional business, that’s something that we are right now towards the end of finishing migration for third-party technology to our in-house technology.

As I mentioned before, we have aggressively expanded in the past few years to white labels. China as an opportunity for us to extend -- represents the largest market for us, about 20% of our – little over 20% of our revenue today comes from Mainland China loans, about 50% from Asia. The more countries like China liberalize the currency regime, a lot more people to take essentially more money out of the country, allow the currency to flow, Delaware, obviously the big opportunities for FXCM, as other BRIC countries have done most people don’t realize, for example, Russia. A few years ago liberalize completely its currency, it’s a little more today they free floating on restricted currency that is something we expect the Chinese to do. In next few years, the world expects that and expects the BRIC countries to do the same.

And acquisitions and I will get into something that we have been doing quite a bit out in the last few years. As you can see our institutional business, we as a business that we are unlike the retail business, we are one of the dominant firms in the world institutional business. We are one of the small players in the business, represents today almost 1% market share, it is something that the good thing about that business is a business that is a very one dimensional price competition business.

And FXCM, over the last eight years have built the great distribution network of almost 500 institutional clients is something that we want to migrate our own technology and we’ve seen recently, as we did our migration that enhance the volume – capture these clients that essentially scale of processes and somehow using third-party technology to our clients to win higher market share. This is something that we expected to do a lot more aggressively in the next few years and expect the institutional business that have been publicly stated goal about 50% of our business in the next few years.

On an acquisition front, FXCM acquired four firms in the last two years primarily due to the environment in the retail FX. You can see it in the slide, we’ve paid relatively modest amount. For most of these, they’ve added very nicely to our tax generation and that’s just probably in cash flow results as well. It is something that we continue to do and always on the lookout for acquisitions, something we have said probably before, we are aiming to continue in this year especially if volatility slows down at all.

One of the best stories about FXCM, despite the fact of our clearly low, FXCM’s gaining market share come through acquisitions; as you can see from the blue bar on the right is organic growth, which absolutely grew at a faster rate than the overall growth simply because of the gaining of market share versus our competitors.

This is something that FXCM is one of the only public companies in this world and has allowed us to – into a lot of gaining of market share. We think they’ll continue to do that as regulations become stricter and more expensive, has become ever more process to be in our business. Our business is one of the most overly regulated and cost to financial services, such as to be in and this kind of presents a huge window of opportunity for us, because direct entry has been made extraordinarily and artificially high.

Just to give you an example, there has been 80% shrinking in competitions in developed markets in the last five years. And actually there has been a fairly decent size of shrinkage of competition, for example, in the U.S. just in the last six or seven months. As you can see here, this is our revenue in EBITDA and this is something that we are – as you can – if you go back all the way through 2008 and you remember a slide from before, those revenues in EBITDA is something that we did, the $258 million and $135 million, it’s something that we did with one set of the customer equity after that.

Now, somethings have permanently changed, some regulatory changes have made that somewhat of a permanent downturn. But those of the reasons explained the downturn in margins, where we had over 57% margin in 2008 and a downturn, obviously in profitability has been – the volatility, I tried to show you before and the lack of interest rates as those two things were down, that profitability comes roaring right back over a much, much larger base of customers that we’ve seen in the previous chart.

This is something we believe that FXCM is very much great for the growth. And as the things turn around and January, which we recorded January metrics a few weeks ago, proved that we are very much that quote – strength and volatility came back. Our numbers shot up pretty dramatically. I think we definitely report that trend has continued in February as you will see and we are reporting on earnings on Thursday and we’re releasing February metrics on Thursday, which you’ll see in events. It’s something that, very encouraging to recent trends, it has been better than 2012. So slightly lower volatility on record for a very long time, not so much the case this year with all the headlines from Europe and made for -- actually a very good thing for our business.

And you can see that in volumes we sort of took – this is the mostly quarterly bar, except for the last bar in each of these charts. In January volume obviously you could see way above the average of most months, most of our season that we’ve had in recent times and this is also a kind of showcasing volatility. And this is a minor uptick in volatility, not as you can see from the chart, which as we discussed before. This is not in anywhere near return to not even 2011, 2010 volatility this year. If we were back to 2010 volatility something will be past our lives.

Institutional trading volumes, I’d say debt last year is also reason that throughout institutional trading volume does also have some structural back up as made it very difficult only because of its largest participant at major dealer banks, and obviously then as a group as well as regional banks have been under enormous amount of regulatory pressure and are doing live FX trading.

Because of such things that we believe as a temporary issue only because stock foreign exchange is one of the only asset classes as we descent from the European financial transaction class is one of the only asset classes that is exempt from that trend. It’s only the only asset class that is exempt from the near to exist that trend equivalent per se.

In Europe, it is one of the things, because as it untouched by all those regulatory things, one of the things that we believe that we had corporate accounts for hedging purposes. We had hedge from accounts for speculation purposes or migrate that to the new FX trading as other forms of trading becomes much less attractive from a capital intensive perspective.

As you can see here the more important thing is not the growth in accounts. And you can see on the left-hand side, the percentage of larger accounts, which is the blue bar versus the smaller accounts, which is the grey bar have continued in our favor. And on the lower right-hand side, the equity pair accounts has been growing tremendously especially since our IPO, partially again through acquisitions and partially organically and more organically than not.

I think it’s something that showcases us as a more trustworthy and much more reliable current party to our customers in relative terms to our competitors and allow us to gain market share and allow us to gain market share most importantly in the larger accounts in the field, which if were able to the way that I point too much larger accounts, the one that I disproportionately add the most in commission record.

So in summary, we believe that FXCM is – in the last few years has increased its scale to a great degree as essentially built itself despite extraordinarily tough conditions. We’re a much larger company than we were just a few years ago. We’re very much positioned for a new trading environment. Once that comes up, we believe that new trading environment will actually benefit if it stays like this for the rest of the year, we will see a far different financial results than we’ve seen in the last few years. And anyone has any questions?

Question-and-Answer Session

Unidentified Analyst

(inaudible). But let me stick off, Drew you mentioned, now saying a very good January and a really good February in 2012 on your comments. It still costs reduction in both -- can you talk a little bit about what you might be doing and in what areas do you see the best leverage if you will of those savings?

Drew Niv

Sure, so we’ve had some of this is sort of a legacy issues as the contract are running out in marketing. We have some very large reductions in marketing. We believe it’s $3 million, $4 million plus going forward. Some with the pace of last year and we do have some structural cost reductions that are not essentially migrating from the third-party technology.

I think the various institutional businesses in the class one actually save us in all $50 million of year. We were just allowed in the recent months to by Japanese they finally, take out the foreign trading systems for the company’s volume at October 2011. It took us over a year to get permission to migrate those customers off of that system on to ours.

That in it by itself is a little bit over $1 million a year and this is something that we are kind of very enthused about, it’s a relatively paying with cut. We have done some -- some more manpower reductions. We simply select manpower reductions and various – overall, it’s not an overly ambitious cost cutting effort. But it is enough to think that – to keep, if you will, the muzzles and taps to the firm really to bring back very quickly. If we think volatility is here to stand, but it is enough to actually bet if it’s not.

Unidentified Analyst

Thank you. A two part question on FX, volatility; any unknown events sort of what’s you’re educated analysis, why do you think trading volatility sell even further in 2012 from the prior three years and what sort of scenarios would you need for trading volatility to recover to the levels you had in 2009, 2010 and 2011?

Drew Niv

So there is a – and I wouldn’t call 2011, exactly a stellar. We have volatility perspective that to get back to more normal event. If you really know what has held us back in the last few year in 2012 even worse is that FX is largely a fixed income instruments and most FX trading and traditionally has been early I guess the overnight counter trading and taking the advantage of the interest rate differential between the different countries.

Therefore largely FX rates move on interest rate projection side, it’s a differential projection. That’s been the largest market mover if you think to sort of the survey of finance professionals due to where we are in the world six months ago or eight months ago, you would have said high interest rates of zero for the foreseeable future and there was a very little disparity and the opinion in those people that would not be the case.

So what we’ve seeing in the last three months is actually now – as I just have opinion that some people are saying that’s obviously if you allow, some people obviously are expecting that clearly is going to end in the United States and those to think about obviously interim to tell for people in this room, the asset allocation has gone on in the last four or five years into fixed income without asset allocations just stopped if not has to reallocate by the amount of money that has to move around the world in every currency and everything, and essentially all the world has to adjust something to a new regime of actual growth and inflation and other things. You will have to be fairly substantial. So in any sort of move that way would be very, very positive for volatility.

There is other extreme of things getting worse and the central banks can’t stop them from getting worse, right. And that’s the seniority will watch the central banks for them to deserve successfully in the last few years. It essentially what some people believe that’s artificially, temporarily or permanently as directly slide into the financial EBIT by many parts of Europe, which was taken to the other parts of the world alongside with them.

Most people believe that it’s a temporary phenomenon. At some point you will not be able to stop Greece and other countries form defaulting and they’ll default and we should bring – centers are default, obviously the market anticipate. So all the tremors out for example, the two busiest days we had in February were obviously post the Italian election. Okay, the Italian political situation is much more stable and this kind of revenues in terms of optimal has to come back. Those are the two things where the world swings one way or another should bring volatility with them. But these are obviously hard facts.

Unidentified Analyst

Can you just explain your business model, how much income over time you can earn from a net interest margin spread? So when you look at your customer balances, when they’re actually trading to what degree do they leverage that amount, two to one, ten to one and are you actually earning a spread on that or they’re just buying a leverage contract with no margin borrowing on their front?

Drew Niv

Yeah, so there is essentially two industry components of earnings at FXCM. One is we earn the smaller part of earn interest on the balances that family don’t pay interest, we just earn it a lot ourselves. Today that is obviously a negligible and meaningless amount. That was not a negligible of over 5% in 2008 and a bit more in 2007 customer revenues. The bigger component, which was over 15% of revenues for in 2007 and 2008, was about 15%.

The financing overnight positions, so essentially most people are leverage. I believe we took it certainly last year and average about 15 to 1 on an overnight basis. It’s kind of a few dealer shop kind of 1.2 times. People are generally speaking to think about their long Australian dollars just as an example short yen by China captured that interest rate differential between 3 and 0.1 today.

We make a threat. We don’t give them. We essentially target more than 0.1 for their financing the trade. We don’t get much in much trade. In doing that trade for that spread is what we get and what we charge something that is essentially a huge portion of revenues historically, in the past few years it’s been less than 1% of revenue, I would say, in 2012 it’s less than 1% of revenue.

Obviously that rebalance that has zero cost attached to it whatsoever, right. So when that was on the decline that was slight not just off the top line, but dollars for dollars of the bottom line, something when it comes back, it’s dollar for dollar addition to the bottom line obviously was, in fact, that assets are quite higher. We will be significant.

More importantly, and this is actually a more meaningful number and sort of speaks to the long-term potential of the company. If you think about what we have done with a long period of low interest rates in the world, we have essentially and I’ve invented this term. We have essentially Japanized consumer. Okay, if you look at Japanese consumers facing 20 plus years of zero interest rates, essentially kind of translate very mature over 10 million individual participants in the retail FX because of the fact that this was the best way to get yield, there is no way to get yield before.

We believe that essentially many of the world – developed world consumers essentially have been Japanized in the same way did they now all hunting for yield. And one of the best ways is to going to hunt the risk, in fact, the risk adjusted ways hunt for yield, when short-term interest rates return, we will be to calculating and in currency penetrating and that carries a lot less work, and a lot less.

Our love is to where talking about now, allow us first and allow us the issues in duration, default, and other things and other fixed income trading, because it’s sovereign risk and it’s overnight. That’s why we believe that when it comes back, it’s not just the money that we have on the books. That we will go to work in a much more productive way and profitable way – it’s or to many that it’s going to come that isn’t being here yet, because for that instead of raising that has been trained now to look for the interest rate.

Unidentified Analyst

Hi, Drew, with the returns in volatility has your acquisition pipeline kind of closed that, that’s question one? And question two, any update on the white labels in your sense of progress as far as recent E*Trade meaning your integration target?

Drew Niv

Yeah, most of our competitors and most of our people in this business is run by traders. If they’re doing well by noon, by 3 pm, they’re already not ready to sell anymore, so you can imagine that. The pipeline of acquisitions went from – everybody wanted to top list and all of 2012 and a lot less people wanted to talk to us in the – there is you know, because of rule changes in the aspects in other places, structurally people that will be leaving geographies nickel and just prohibit it regardless of how volatile it is.

And there’s a set of prices people deploy their money. And so, we’ll still see some more acquisitions, they are obviously much less than they’re very much dependent on ultimately when I escape. But you will still see some because of structural issues being in Japan, being in the States, and even in the UK, so we still see enough demand for acquisitions live, but there’s going to be some deal.

In terms of white label, we have made a lot of head way with lot of – we signed a few dozen every year in 2012 with no exception. Obviously, it’s still the higher profile be able to take longer to pan out. They’re still not doing what we believe. They can be doing. I think when it’s say to come back, they’ll be doing more. But I think pan is not to a friendship come back obviously. But as bigger relations go, they tend to be slower in integration and all the other things that need to happen for them to more logistically make it easier for all our customers to access it.

But we think it is something that it’s going to happen and it’s necessary for a lot of those people in order for them to try to move forward – going forward. And I think that if you look at from a retail perspective, the retail FX offers a very good hedge to lots of brokers in a sense when the good times and interest rate arise, low interest environment sort of end the good world for bond.

It potentially ends the good world for stock just the same if it ends to a broker list, right and the one asset class that does well when things to a broad network kind of go nuts is the FX. And I think a lot of people are very conscious of that and are going to actually try and make sure they catch that way when it comes.

Unidentified Analyst

Drew, you mentioned in your prepared remarks that February was if we had to say, it’s trending since the January. Can you talk a little bit about where you see the design, if it’s really the retail between sort of white mirror versus the direct? And then an update maybe what you’re seeing on institutional side?

Drew Niv

I think the detail I don’t have with me. We will have those on Thursday in terms of the – is it more direct or indirect, we may have the numbers, I’m not sure. But I don’t have them here.

Unidentified Analyst

(inaudible) I mean, institutional I think you are in the process of converting a fair number of new clients. Can you give us an update of where you were at the end of the year, where you are now and what the experience has been in terms of any service the levels and those volume change?

Drew Niv

Yeah, so we have seen volume pickup in the institutional business. That is something that has happened. But along side of the retail business, some of that is obviously volatility, some of that is successful migration of customers over the new plat our organic platform. It is something that is still behind schedule, but not as much behind schedules as it was at the end of the year. And it something that we’re hoping to definitely complete in the first half and that never be fully completed. Some customers don’t migrate out of their previous platforms and that is fine.

We now for new customers for example existing are able to essentially say, I have the lower cost option. For you, that is organic and how, and it’s something while sort of a more longer-term site. We’ve already seen the fruits of that in the beginning of this year, for January we saw to show volume jump, February same. And we have a very, very healthy pipeline in terms of pick up in market share from our clients that are eligible and we’re turning people around, we’re taking market share for sure as we turn marketable on to our organic platform versus third-party platforms in the market.

It’s that sensitive. In terms of profit margins, users do pay attention to little nuances because these are largely machines making decisions when we trigger it. And that -- we believe we’ll be very positive year and be a big surprise. So most people kind of discounted our institutional efforts and largely because it faced a lot of headwinds last year. They all have been same this year. We’re surprised – so far surprising to the upside.

Unidentified Analyst

And you in your first project said in terms of who you are, you mentioned that you’re more of a brokerage area and not a principle agent. But however, I think what we’re thinking as to the principal side of business. Can you give some updates on where you stand on that and what the experiences have been so far particularly with the real pick up in volatility here, Drew?

Drew Niv

Yeah, we bought and for those of you who don’t know in June 2012, we bought Lucid Market. It’s the largest non-bank market maker in the FX business, primarily the service of our institutional business to get extra deal from that as well as take out market share. That business we have around 50.1% of that. It is a business that is obviously slowdown in volatility in the latter half of the 2012, and has picked up in the last two months, especially in February took up very nicely.

And so we’re very encouraged by that business. Even in 2012 in a tough condition, it generated a lot of cash flow and very positive for FXCM. Then we believe that this year, it’s going to be even better so far in the last two months even better than 2012. So it’s something that we are very encouraged with that.

Unidentified Analyst

Just two part question, what are the costs due to acquire a new retail accounts? And then part two, how well up quarterly, do your retail accounts do? So what I’m going to asking is that the 50% of accounts moved half their money in their balance over the course of the year. And that’s moving away and you have to replace them with new accounts?

Drew Niv

Yeah, I think kind of the comments issues are a lot of people with those in this existing cost and we will get cost acquisition, it’s very, very widely by geography can be as well as $100 or $200 in place like China and it can be high as $1,500 in the Western Europe. I think the average is something like $600 or $700 phenomenon facing that it costs us to do. The cost decreases in volatile times, increases in non-volatile times, by sheer interest in the market.

In terms of success rates, the success rates, the success rates globally, if you take the whole things about the clients about 30% plus, make money sort of 5% or 7% globally a little less than that, that continues on an ongoing basis.

The important thing though is the following; the client group that represents the larger clients, the clients about $10,000, the clients that contribute over – almost 70% of our revenues. That success rates are more like 50% plus. And so, we are – if you look at our overall churn, it includes lots of very small clients that are meaningless to revenue. So do they churn those clients, do they churn faster? Yes.

Do they financially matter? Not so much, okay. If you look at the client that financially matter, they churn a lot less. This is still a leverage business. This is still a high frequency trading business. So if you look at what’s the average customer trade 700 plus times a year, it’s essentially 10 years of trading at a normal online discount broker.

So if you look at, sort of obviously you’re not expecting those clients to have the churn rates of Charles Schwab, because they’re not doing that Charles Schwab. Most importantly though, the way we need to look at this is, this is not function of FX trading, it is a function of FXCM. It is the function of the current industry and what’s important about and what people kind of misconceive about our industry is that, the industry has high churns because of FX. The industry has high churns because of small firms, relatively small firms like we are saying, they are attracting small clients.

So if you look at a client that says, I have $1000, $5000, let’s say, what is the stated aim of this account? The stated aim of this account is to grow make $50,000, try to turn $5,000 to $50,000 is a relatively difficult thing to do in odd value, we’ll not succeed then you will lose money trying.

When – if you look at some of the larger players in the financial services, they are big banks or private banking the Charles Schwab in the world, the Ameritrade of the world as much larger accounts, what our stated aim is for the customers to get 10%, 15%, those kind of rate. Obviously, those rates are far more realistic and while also do – occur a lot. They tend to be on average a much more successful when we are trying to get 10% in and out the customers $5,000 is the way for the time to get 10%, the product is could be able to concern and therefore we’re not attracting by and large, the larger customers we still need, this to be more conservative.

So opportunity to higher churn business is the function of how we are as the brand of the company, this is the 13-year old business, all right. If you look at the expenses, some of our white labels to our largest financial institutions do attract larger clients’ experiences and asset different, okay.

And so, this as an FX business is the business the high churn business that depends on who the end user, not really depends on FX itself. And that’s where the misconception comes about our business and not an industry issue as much as it is a name-by-name type of an issue.

And as we get into larger and more mainstream institutions for white labels, we are going to do larger mainstream customers with less leverage and out speaking the asset trading, gambling type clients they are seeking more of the sort of the well preservation clients you will see the success rate to raise fairly dramatically.

The other thing in that is that when the current trade was going well, for example 2007 Japanese customers had an almost 80% success rate because if you look at the young profits, they all went like that. And it was essentially a one way trade for many years of the yen dissolving and that the currencies are how much higher yielding moving up against it. That abruptly changed in August of 2007 and that’s almost a four year period, where the yen’s strength just kind of crushed the carrier trade to the ground and also it helped didn’t help in the industry.

That is changing now as of the recent Japanese Yen, that could depend on that intervention but that’s why interest rate moves. That is something that brings that back and as if you will buy it and save all of our customer profitability and that as those days come back.

Unidentified Analyst

We got to (inaudible). Thank you very much for a great presentation and thank you everyone for attending. Thanks so much.

Drew Niv


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