Since launching this blog, I've had the pleasure to interview several fascinating Forex traders and Forex trading coaches, but rarely do I get to interview the masterminds behind an entire Forex brokerage - the pioneers creative enough not just to build up an existing brokerage, but to create their own from the ground up. David and Susan Cooney, the founders of the soon-to-be-launched MahiFX are just such creative forces. After working in the various Forex related fields, the Cooneys decided to open their own brokerage, MahiFX.
Although many details about this new Forex brokerage are under-wraps until the MahiFX launch in February 2012, I sat down with Susan and David to hear firsthand about the plans they have for their new venture, and how MahiFX will differ from the other Forex brokerages. Stay tuned for more information and hopefully a MahiFX review when the platform is live in a few months.
Why the name MahiFX?
David - It's a Maori name meaning ‘our craft' which we think sums up what we're doing with market making. We also wanted a connection to my birth country (New Zealand).
Why did you prefer to be a market maker, as opposed to a no dealing desk brokerage?
David - It's what my background has been since 1993. I was really lucky to learn from Susquehana in the UK. They had a defined philosophy and I began learning the craft. It became part of my DNA, what I do. The focus has always been on accommodating other people's wishes, rather than being a proprietary trader.
Susan – A lot of the negativity in the market surrounding market makers in general is related to the fact that people think market makers are trading against you, which is a bit of a misconception. Brokers often perpetuate the idea that market makers are the root of all evil, but obviously there's no truth to that. If a broker operates a complete agency model then they are immediately passing each trade on, so the risk ends up with the market maker, one the client has no relationship with and with additional brokerage on top. Clearly it's more cost effective for a client to deal direct with the market maker.
David "“A market maker has no advance notice that a trader is about to click on a price and execute a trade. In the absence of this information there can be no suggestion of a market maker trading against a client. However if a client leaves an FX order to be executed at a later stage, it could be argued that a market maker has advance information about a trader's wishes and will act upon them. This is an issue that is common to market makers and brokers alike. We take this issue seriously and have built our pricing engine completely separate to the order book so it knows nothing about client orders. Given its fully automated the machine cannot trade against clients.
What type of spreads will you have?
David – Spreads need to be a function of market conditions. There are bouts of volatility, and it's consistent with market maker mentality that you'll go wider during certain conditions. We publish our base spreads for complete transparency. It's the absolute exception rather than the rule that we would be wider than the published base spreads. It's a challenge to publish the highest quality rate, and we're committed to doing that.
Susan – It's also important for the client to be aware of what's happening with our spreads. When there's a news event (NFP), traders are often left with wide spreads and don't know when or if the spreads are going to tighten, so our goal is to help clients predict this change. We want clients to be feel they can rely on our pricing even during volatile periods.
David – you can only do this if you control the formation of the rate yourself.
Will you be using proprietary platforms, or traditional platforms (MT4)?
David - It's a proprietary platform - we've built the platform ourselves. Includes all of the key features we've come to appreciate over the years. The really important part is that we own it, so we can control the entire client experience, and incorporate client feedback, and these improvements are important. One of the vulnerabilities of MT4/5 is that if you request changes, all changes are global, including for your competition.
Susan – In the early days e-FX in the institutional space, many banks simply white labeled the same system. Dresdner built its own platform, which made it completely unique. We feel that by building our own platform we can continually evolve it with new technology. Incorporating feedback and listening to our clients is a critical part of our offering.
What would you say is the most valuable lesson that you've learned during the setup of this brokerage?
Susan – How incredibly hard it is. When you're in the investment banking world, everyone talks about running their business within the bank, but everyone has a lot of support there and many things are taken care of. We're building it on our own, and have to make decisions even at the most basic level, which is certainly a challenge.
David – One of the things we've learned is that you have to build a really good team of people because one person can't do it alone. (MahiFX currently has 11 people on the team).
MahiFX is fully automated so we don't have a dealing desk. We think the technology and quantitative analysts are just as important as traders in today's market making business, since we're building technology that does the trading. The people with trading experience are important to monitor the operation of the machines. It's akin to a pilot who puts the plane on auto-pilot but sticks around just in case.
Do you plan to trade on the platform?
David - I was a currency options trader since 1993, but we want to stay away from any suggestion that there's a human dimension to the way our platform works, or that we're actually trading against our clients, so we won't be trading on the platform.
What are each of your specific roles within the company?
David – We are basically co-CEOs, but my focus is around the technology and risk management, hers is around the client experience and marketing.
How does working together in your own company differ from the work you've done together in the past?
Susan – We're pretty driven people, and we were very passionate about what we did in the past so nothing has changed there. The biggest difference here is that we did have an office, which separated work from home, but this was unfortunately destroyed during this year's earthquake. Luckily none of our staff was hurt, and in the immediate aftermath the entire team shifted out to our home office and now they don't want to leave!
How is John Paulson related to the company?
David - It was just a tongue-in-cheek marketing campaign to show that some people who trade can make a very large amount of money. Of course there are no guarantees that people trading on MahiFX will make 4.9 billion dollars!
Any final thoughts?
David - The retail trader can get a better experience dealing direct with someone that has our experience in price formation. We can significantly improve the spreads and the quality and consistency of the trading experience. That's our mission.