SYNERGY FX RESPONDS TO THE SWEDISH NATIONAL BANK REMOVING FRANC PEG

NEGATIVE BALANCE PROTECTION POSTED ON: MONDAY, FEBRUARY 02, 2015

It’s been really interesting to be a fly on the wall looking at the other brokers over the last couple of weeks. Synergy FX FX has emerged relatively unscathed from the ‘black swan’ event of the SNB removing the CHF peg from the EUR. It’s what’s happening elsewhere that is fascinating. Last week lots of us in the industry attended a b2b forex expo in Hong Kong. Where this would normally be an excuse for old faces to catch up and puff out the chest feathers over a few bottles of Bolly in the company of a rather deep voiced and big footed girl named Alice – this year it was all about who wasn’t there, and the scramble for the brokers who were, asking under table questions “Are you ok? No really, are you ok? Are you for sale for nothing?” This market is actually very small. If I were to believe what people say then I’m very impressed with how limited the casualties were. Not to underplay just what happened to the big boys in town; including the collapse of one of the biggest players, but I think the more telling is the fall of Boston Technology. Lots of the brokers out there used BT as their liquidity provider and bridge provider. In fact, the Boston Bridge was one of the first and at one time everyone used it. What happens to those brokers out there that used this infrastructure or, more worrying, had their monies tied up there? I think there may be some misunderstanding as to how independent brokers the likes of Synergy FX FX work, and in fact how the whole market works. We all tell you we have access to multiple global banking providers that quote us the interbank market. This is true, and it’s true BECAUSE multiple global banks make their incomes by selling their liquidity to the market as general. All they want is flow. These banks quote their prices in to aggregators. Brokers like us have access to these aggregators through our chosen prime broker. Brokers themselves may then further aggregate several prime brokers. Brokers may even have the audacity to quote the names of the banks on their websites (we too did this until one of the major UK banks, for whom I even used to work, came to me and said look here buddy get that off or let’s party in court). Please don’t think that this means these brokers have direct relations with these banks; their prime brokers do. Or, as is often the case, the prime brokers of the middle man do. It’s all a question of credit, those of you who are or who have been bankers will know exactly what I’m talking about. Now, let’s not underestimate the value of the independent broker. We have a very important role in the ecosystem of financial services. It is the smaller houses such as Synergy FX FX who create competition, and as a result, fair and free pricing. Without us, you the client would have an asset class that would be impossible to access. If you could, it would be too expensive to be practical. The last few years have seen this market place expand for the better of you the trader. Events like those of the last couple of weeks are a cleanser, but they will by default bring issues. The banks and serious prime brokers will question the credit lines they are prepared to offer the smaller houses. This will lead to the potential collapse of some of the more ‘interesting’ houses operating in ‘easy’ licensing regimes, the consolidation of players and the resurgence of the under the table players. This is one reason why I think you should always choose a reputable licensed broker. Most of the significant Australian houses with ASIC licenses are, in my opinion the right option for the active trader.

We all have access to the same pricing from the same originators, albeit through different prime brokers and aggregators. So, what is there to distinguish between us?

• Do we run an A book agency model or a B book risk model? • Well, this comes down to the type of account our client chooses and how we run risk to best

manage our overall portfolio. • Do we offer super-duper discounts or bonus credits?

• Yes, we all love a free set of steak knives, but come on – none of us run charities, and there is nothing for free in this world. I love you the customer, but please stop asking me for a 100% credit bonus or discounted commissions.

• Tailored Client Support • We aim to have true 24 hour support with an educated and experienced team. We are not faceless.

I’m proud of every single person on my team, and each of them is here to help and advise our clients.

As a result of public demand for Negative Balance Protection, we have created our ‘Hybrid’ account. Historically Synergy FX has run an agency model, as we have always believed in true, fair and transparent pricing for our clients. As we’ve seen however, this model has led to the potential of the clients going in to negative equity, and this has caused disasters with some of the big boys. We in Synergy FX have the skill sets to manage the ‘edges’ of our clients exposures, which has enabled us to change the way we think about the service and the pricing we can offer you. We can now offer you the exact pricing that we receive from the market, and we simply charge you a small commission for each transaction made. So that’s spreads from 0. I’ve been involved in fx aggregators for years and on rare occasions we do indeed see inverse pricing (if only for a split second). Houses like ours normally close such arbitrage opportunities for our own P&L, but today I was looking at our own website and I noticed we for a split second were inverse by 0.1 pip on the EURUSD, and realized I had forgotten to do it. With this service we can manage risk pro-actively and offer the client Negative Balance Protection. We still offer you the same quality of service you would receive as an agency client. We will never employ the negative tactics such as a virtual dealer plug-in that an aggressive B book operator would. So how, you may ask, does Synergy FX make its money? Well it’s a component of covering our costs with the commission charged; and then the efficiency (or, more accurately, for the pure mathematicians out there, the inefficiency) of our hedge and its performance. This account is not just marketing hype. We’ve already had our lawyers draft our legals, and they are auto delivered to our Hybrid applicants. Let me just clear up some confusion that seems to have arisen from the interpretation of these documents: any account at Synergy FX has the ability mathematically to go in to negative equity. From a trading system point of view it is impossible to avoid that, and even if it were possible, I feel it would be wrong and not a true reflection of markets. HOWEVER, for those ‘Hybrid’ accounts any such negative balance is automatically forgiven and we’ve made that GUARANTEED in our PDS. No other broker at the point of writing has done this. I believe this is the future of our business and I’m proud that Synergy FX is a leader. The reason we can do it is that we have an experienced team behind us. I appreciate this is becoming a small novel, but let me also explain the component of leverage and why this Hybrid account is restricted to 100:1. We’ve all begun to enjoy and expect huge leverage in our trading. It’s the independent brokers who have been at the forefront of offering such leverage. Again, this is a credit game. If we run an agency model we

can afford to run portions of our balance sheet to risk by having the luxury of offsetting long and short positions to our LPs and enjoy netting. The B book operators who offer high leverage are actually taking huge bets against their own often small balance sheets, all in the hope that such leverage will lead to the client blowing up quicker. I’m in the camp that believes leverage is both an important part of trading; but also believe that over leverage is just crazy. I do believe that as a result of the last few weeks the regulators around the globe will play big brother and incorrectly decide that leverage is the enemy that caused the problem. So, I’m pre-empting. I enjoy 100:1 leverage from my prime broker. Within this, my prime broker is taking the credit risk as there still is no bank in my mind that would offer higher than 30:1, even for such a vanilla product (sorry if I’m boring you – but I used to be a total banker). This hybrid account is all about managing risk – not promoting it. So the maximum leverage offered to our clients is the same that is offered to me: 100:1. This is an account designed for real traders. It’s all about providing you with the best possible product. Happy trading all. Let’s be profitable and safe. Christian Dove Chief Executive Officer - See more at: http://Synergy FXfx.com.au/negative-balanceprotection/#sthash.EWXu0F9v.dpuf