Spot Capital Markets (SCM) is Spot Holdings binary options brokerage, regulated by the Cyprus Securities and Exchange Commission (CySEC). Finance Magnates sat down with SCM CEO Udi Algrassi to discuss changes to SCM’s business model amid CySEC’s ever-changing framework, the prospects for the binary options industry, plans for the future, and more.
Please tell us about yourself and how you reached your current role.
For the past 15 years, I’ve been working and living in China, Israel and Cyprus. I’ve established a consulting company in Shanghai providing national business development services, including sales and marketing to leading companies from the US, Israel and Europe. A few years back I was the CEO of an ASIC licensed broker in China and after that I relocated to Cyprus holding the same position at a CySEC licensed broker. Additionally, I was acting as a non-executive director in a few regulated brokers and blockchain enterprises. When the shareholders of SCM addressed me, explaining their vision about where they hope to see the company in the future, they gauged my interest in joining forces as SCM’s CEO.
The binary options industry has been under intense scrutiny from both the press and the authorities. How has this affected SCM’s volumes?
We have always strongly supported the efforts of the regulators to enhance investor protection, however we cannot really say that our volumes have not been impacted, particularly during the first quarter of 2017. However, by evolving our business model, restructuring our operations and committing to more automation, we have seen a steady yet continuous increase to our numbers. Our existing tied agent model requires us to take full and unconditional responsibility for our tied agents’ actions and to minimize the potential detrimental impact on our reputation in the event a tied agent acts negligently or outside its authority. We recognize that if our reputation is diminished, it will be very difficult to restore. We therefore ensure that our tied agents are fit and proper to deal with clients in our name and that the clients dealing with our tied agents are afforded the same level of protection as if they had dealt with SCM itself.
We cannot really say that our volumes have not been impacted, particularly during the first quarter of 2017
Additional to its existing tied agent model, SCM has devised a joint venture model which allows our partners to offer us the traffic and marketing expertise, while we offer the technology and client support through an in-house contact center within SCM and through automated client onboarding as well as via our Spot+ technology, which automates sales, marketing and conversion. This not only ensures the proper servicing of our clients, but also the exercise of the required compliance controls.
Last February CySEC issued a circular forcing brokers to move their call centers either to Cyprus or to another EU member state. What was SCM’s response to that?
As SCM’s main client base is within the EU, we have always taken the route of the tied agent regime to establish our presence in the Member States via tied agents who act on our behalf. Furthermore, SCM’s in-house Customer Support Department, provides support and information directly to its clients deriving from its in-house brands and intended tied agents prior to their approval by the CySEC and subsequent registration in the relevant registry of tied agents.
According to CySEC records, SCM now has six tied agents. How many tied agents did you have a year ago?
SCM has always been an industry leader as the CIF with the most tied agents, and with the regulations becoming even more stringent, we have seen increased interest from parties around the E.U. in getting on board as our tied agents. This year we have an additional tied agent approved and registered in Sweden, another Cypriot intended tied agent pending CySEC approval, and an approved by CySEC Polish tied agent pending registration with the KNF. Further, by the end of 2017, we intend to appoint at least another 3 tied agents from the Czech Republic, Portugal and the UK, respectively, and 4-5 joint venture projects.
SCM has devised a joint venture model which allows our partners to offer us the traffic and marketing expertise
How is SCM monitoring its marketing and sales operations?
Through its established supervision and monitoring division, within SCM’s compliance department, which consists of multilingual people dedicated to monitoring all client-facing personnel’s communications via recorded calls, e-mails and chats, and activates its enforcement procedure whenever an instance of non-compliance is identified. Our monitoring team also evaluates and scores client-facing personnel’s compliance performance to ensure their remuneration is not contrary to the best interest of SCM’s clients.
Our in-house web design and development division, within SCM’s business development department, creates financial promotional material which is reviewed and approved by our compliance department prior to their publication.
How do you view the current state of the industry?
Our industry is naturally volatile, continuously going through tremendous changes and challenges influenced by the aftermath of the economic crises, the opportunities resulting from technological advances, and of course by the rising regulatory pressures and developments. The industry is currently experiencing considerable brand damage, raising questions to investors about the trustworthiness of investment firms and the whole financial sector. Investment firms are currently facing high costs in the form of time, resources and capital, related to the implementation of various strict and often overwhelming regulatory requirements. Stability is improving however, and the quality of investment services, and such principle-based rules are influencing technological innovations and competitive outcomes.
What do you think sets you apart from the competition?
Our aim is to form long-lasting business relationships, through trust, transparency and respect. Despite the high competitiveness surrounding our business, and our constant strive to expand our market share, we always endeavor to fully comply with the letter and spirit of the laws and ethical principles that govern our operations and to be fair competitors who never disparage others.
SCM selects people with backgrounds and specialties that reflect the diversity of the communities and cultures in which we operate, thus ensuring that every client’s experience is fully supported, and to deliver the best service possible even to our most demanding clients.
We pair the best people with the best-in-class trading platform, delivering innovative technology that addresses the needs of a diverse spectrum of online investors who want sophisticated tools to be able to identify trading opportunities, analyze potential risks and returns, and test their strategies. We strive to empower our clients to make informed decisions about the products and services we offer, thus enabling them to select the ones that best meet their needs and personal circumstances. We offer education to our investors to learn investing techniques which can be put into immediate practice, including demo accounts, one-on-one guidance on using the tools offered by our trading platform and live webinars on how to trade.
Binary options regulators are not observers anymore, and are now active participants and policy makers
Furthermore, apart from adding CFDs and cryptocurrencies to its list of products, SCM will be the first in the industry to offer the new SpotOption platform, Spot5, which will feature CFDs and the new product of Digital Contracts, a product developed in accordance to regulatory standards that has the advantages of negative balance protection, without a leverage requirement, swap points, rollover or commission.
Many say that the regulated binary options vertical is past redemption. How do you respond to that?
The rules of the game are definitely changing. Binary options regulators are not observers anymore, and are now active participants and policy makers, making the binary options industry very demanding, and it is expected that some brokers who do not have the necessary business model will be unable to survive the tighter rules to deliver what regulators are requiring. The brokers that will survive the tighter rules will be the innovative ones who will transform and accommodate their services to the new regulations.