This is not the first time we have witnessed a change of heads in one of forex’s leading players. However, it is crucial that the public understands the thinking and the underlying reasons for the change. Naturally, all eyes are now on K Duker – Dr. Michael Stumm’s replacement – to guide the company through this pivotal period.
We caught up with K for an in-depth interview. He has already acknowledged that he intends to maintain the achievements for which OANDA is rightly noted including honesty, full transparency, and the best possible pricing.
Change is important in the fast moving FX industry – how do you outline the new management change in OANDA? Are there any other expected top management changes?
Duker: “Michael Stumm has been the organisation’s visionary and leader since co-founding OANDA in 1996. After sixteen years of managing the company’s day-to-day operations, and leading OANDA from a start-up enterprise to one of the world’s leading FX providers, Michael felt it was time to hand senior management responsibilities to a successor. Michael will continue to play a strategic role and also plans to concentrate on his passion for teaching.
As part of the succession plan developed in consultation with OANDA’s Board of Directors, Michael put into motion a full strategic review of the company encompassing all aspects of OANDA’s business. In addition to implementing this initiative, Michael also helped guide two major projects to a successful completion and it seemed the appropriate time to formally make the change. Michael remains a shareholder and will be a part of our team as a member of the Board of Directors”.
Will there be any other staff changes?
“One of OANDA’s strengths is that we are truly an intellectual powerhouse. Currently OANDA can boast more than a dozen Ph.D holders and a great number of masters graduates. OANDA has demonstrated that it is a world-class center of engineering expertise and innovative thinking. My management team will be comprised of the key individuals who have led both our technology, and our customer service teams.
Certainly, there may be some new resources added to our ranks in order to ensure we do the best possible job of meeting the needs of our customers. There are some fantastically talented people out there and I don’t doubt that over the next six months we will look at outside hires. Ultimately, our goal is to ensure that we are in the best possible position to continue to meet the needs of our shareholders, regulators and customers”.
We heard that these changes are part of a major investment in your firm – is there any truth in that? If so could you provide us with more details?
“OANDA is very strong from a capitalization standpoint and there is no requirement for additional funding or an infusion of capital”.
NEA, a venture capitalist firm injected $100 million back in 2008, since then OANDA has expanded across the globe; has NEA been satisfied? Do you need additional capital for new projects?
“NEA representative Kitu Kalary has been a pillar of strength and support for our senior managers. Kitu has the vision to recognize the potential growth in the retail FX space and is a fantastic OANDA enthusiast. Kitu has helped foster NEA’s relationship with OANDA’s senior management and in his role as an OANDA Board member, he has provided exceptional advice and guidance. With respect to additional capitalisation, OANDA is well-positioned and there is no need for further capital”.
What is the firm’s vision and how do you fit into it?
“I think OANDA has, for many years now, been driven by a mission to excel in terms of customer service, engineering, and the provision of the lowest possible prices. We believe that doing the right thing, is the smart thing, from both a corporate perspective as well as from an ethical standpoint. We hire people who are helpful, honest and kind. And we want to run the company in an honest and responsible manner. The truth is, OANDA has already accomplished the difficult bit; we are widely-regarded as a fair and honest FX provider and that is very gratifying for us. At the same time, we have demonstrated our technical expertise with our ability to process an incredible number of trades – in fact, later this summer, we will mark a unique milestone as we expect to book the one billionth transaction to our database. We want to continue to build on these accomplishments and use what we have already done as a springboard to expand our brand even further. We see huge growth in the retail FX market and we have every intention of remaining the “go-to” FX provider as more traders enter the FX market in the coming years”.
You have been developing the Asia Pacific office, are there any new domestic markets that are ready for local presence? (Indonesia, India or even China?)
“Our expansion into the Asia Pacific region has been a tremendous success. Recent market surveys place us in the number two spot in the market and this was accomplished in just under three years. This is a very short-time frame in which to rise to such prominence in a hotly-contested market. Much of this success is due to the very strong team of dedicated professionals we have assembled and this has made it possible for us to build our entire Asia enterprise. We have recently been granted a license in Australia and we also acquired a small Japanese brokerage. We are looking at other markets, including Hong Kong, and we see several FX hotspots emerging in the region in the next little while. Expanding into these markets will help open doors for an expansion into China. We are moving quickly and aggressively – but I would also like to add that despite these moves, regulatory arbitrage is not a concern. Customers can take comfort in knowing that OANDA remains committed to full regulatory compliance and we have no interest in moving into jurisdictions where regulatory regimes have lapsed”.
What is “the” continent for FX, is Asia the next big boom?
“When you examine Asia, you can immediately see the drivers that continue to record growth in the retail FX markets. These drivers include an overall increase in global wealth, expanding internet and mobile phone usage, and a growing interest in self-directed trading. Over 40% of mobile trading is carried out in Japan and FX in these regions is growing at a faster rate than stocks. With this in mind, it is clear that Asia ticks all the boxes when it comes to understanding the surge in FX trading. It should also be clear why Asia is a primary focus for us.
Of course, we are also determined to build on our presence in Europe and the US and it is worth noting that even though these markets are considered developed, there is still tremendous growth potential here for us as well. We have proven our ability to compete in these highly-regulated jurisdictions and we feel the lessons we have already learned in the developed markets will serve us well as we expand our operations into these new regions”.
We have heard that OANDA does not work with partners. Individuals in developing markets use their local knowledge and experience of the FX market to introduce clients, do you think your approach is viable in developing markets where viral marketing (or internet based e.g. through forums etc) is weaker than actual face to face sales?
“I think that in general, this is a fair statement. However, OANDA has always been happy to work with partners who add true value to the customer experience and who adhere to our principles of transparency and honesty.
In this regard, our reputation clearly precedes us as we continuously receive enquiries for potential partnerships and, for the most part, these candidates are quick to acknowledge our commitment to transparency. Hiding fees and other charges is not acceptable to us or our clients, and any potential future arrangements must respect this before we will consider taking on any partner”.
In some Asian countries you have IB’s who put time and effort in however they do not earn without mark ups and commissions, your thoughts?
“We have no interest in dealing in jurisdictions that do not currently have sufficient regulatory infrastructure in place to adequately protect market participants. However, the main point for us is that we require full transparency from such partnerships – thus, we would require that fees earned by IBs are not obscured under hidden layers. With regulatory advancements recently put in place, and some new changes expected soon, we can envision that a model punctuated by increased transparency will become the standard by which all FX providers will be measured”.
How is the acceptance of your MT4 platform? How do you differentiate your MT4 bridge technology?
“Because OANDA has an experienced team that understands how to employ technology to best meet the needs of our clients, we not only had the ability to build our MT4 technology in-house, but we could also do so in a manner addressing our primary concerns. These include low latency, fast execution, and a very high order-fill ratio. Even though we have this customization capability, we are evaluating additional third-party plug-ins that can further improve the platform”.
Your biggest clients base is in the US – how do your other subsidiaries in UK and Singapore compare? Do you have plans to enter Australia and China?
“It is true that the U.S. market still accounts for the greatest share of our total accounts. This is understandable given the tremendous size of the U.S. market and the fact that it is OANDA’s original “home” market. However, in recent years, OANDA has been very aggressive in expanding its global presence and has established new offices in Dubai, Singapore, London, and Japan. OANDA’s experience in Singapore has been particularly gratifying and in the most recent Investment Trends survey, OANDA was named as the recipient of two highly-coveted awards; one for having the “Best Trading Platform Features” as well as “Highest Overall Client Satisfaction”. The Investment Trends survey, which tracks responses from over 9,000 traders based in Singapore, also determined that OANDA Asia Pacific ranks as the second-most popular choice for all traders when asked for the provider of their primary retail FX account. This is quite an achievement when you consider there are more than twenty established FX providers catering to the retail sector in Singapore.
Again, this was accomplished in under three years and we expect a similar level of success in the UK. OANDA’s London office only received its license last June, but in less than a year, has managed to dramatically raise OANDA’s profile and continues to gain market share in the highly-competitive UK market”.
FX has been your forte however mature economies like Canada, US, Dubai, Japan and Singapore have diversified products and trade in equities, CFD’s and commodities, what new products can we expect from OANDA?
“In the past few months, OANDA has released several new offerings and products specifically positioned to meet the growing demand for these enhanced services. Earlier this year, we made CFDs available in several of our regions and in the UK particularly, we have seen a tremendous uptake in CFD activity. We are still assessing the results, but given the success so far, we are looking at the possibility of adding to the range of contracts available under our CFD banner. Since the start of the new year, our FXLabs division has released a handful of original tools to assist in trade decisions. One of the more popular new offerings anonymously lists the top one hundred most profitable trades so our entire client base can learn from the most successful traders. We have also recently introduced a new forex historical “value at risk” (VaR) calculator that uses historical distribution of price movements to determine potential risk for a given position”.
What is the acceptance of your social network? Do you expect to further develop it to make it competitive comparing to other offerings in the market?
“The fxUnity social media network has been well received and we are underway with the next phase of development. I think it is well understood that fxUnity is positioned as a stepping-stone for new traders looking for a less intimidating way to get started with forex trading. As noted above, we are sufficiently pleased with the response to date that we are already hard at work developing the next version. This will include new means of encouraging trader interaction as well as adding new features to help traders become more successful”.
The white-label deal (HSBC) is a breakthrough for OANDA’s traditional business model, what triggered this deal and what can we expect in the future in terms of similar partnerships?
“I wouldn’t categorize the white-label deal with HSBC as a “breakthrough” as OANDA currently provides white label services for several clients. If anything, the HSBC deal is further validation that OANDA has the experience and proven technical expertise to successfully manage the tremendously complex task of an enterprise implementation.
It is also worth noting that as part of the arrangement with HSBC, OANDA provided a custom-build solution based on HSBC’s specific needs. This is really beyond a typical white label arrangement and demonstrates OANDA’s capacity to meet the needs of its partners and clients. Looking into the future, it is difficult to say what other white-label opportunities are possible. What I can say is that OANDA will evaluate all potential opportunities as they form and act in accordance with that evaluation”.
Where do you see the brand in the next 3 years?
“Certainly, there are a number of goals OANDA’s senior management team intends to accomplish in the coming months. The timing will depend to some degree on market conditions and other factors, but everything we do will always be measured against our principles of honesty, helpfulness, and kindness. We earnestly believe that if you operate with these values as your guide, success is all but guaranteed. Of course, in order to remain competitive you also must offer an excellent product, and in that regard, OANDA continues to build on its reputation of technological expertise and innovation. We are in the process of designing and implementing a series of new features to be added to our flagship fxTrade platform. These enhancements will offer greater flexibility and help maintain OANDA’s position as the industry’s preferred forex provider. Over the next three years, you can expect to see OANDA continue to grow and position itself as one of the world’s leading FX brokers. OANDA will continue to provide innovative new products to meet the need for greater diversification as more traders discover the advantages of the retail FX market.”