"It's not easy to cut your share when competing with bigger brokers and with a larger marketing budget."
Finance Magnates spoke with Daniele Casamassima, Chief Executive Officer at Pure Market for his insight into the group’s business model and broader industry perspective.
What makes Pure Market different from other brokers in the industry?
When I created Pure Market in 2016 my idea was to satisfy all that clients and partners that could not find a solution in the “ordinary brokers”.
The FX market is full of brokers, so it’s not easy to cut your share when you need to compete with brokers bigger and with an important marketing budget.
So, I just have decided to don’t compete. We are not a “ordinary broker”, we have partners that comes to us and we design the product that they want.
We have a clear and transparent way to work. We work mostly with Introducing Brokers that come to us with special needs and we try to satisfy.
As a pure agency, Pure Market is the perfect place for profitable clients and money managers that want to find a transparent broker where to trade with.
We give full transparency on trade and 100% STP, on post trade, on request, and we can provide all details of execution (venue, price, slippage etc.).
Moreover, we have no conflict of interest with the clients and we try what we can with them to improve their trading experience.
For this reason, for professional clients we personalize feeds, liquidity, and spreads. In this way we are different, most of our professional clients come to us and ask what they want, we don’t say what we have. We create the product that fit their needs.
Another different point is the company structure. We don’t have sales, and by extension we have no retention.
We work with partners and IBs that are paid on rebates only (working in STP is the only way to pay a partner otherwise you could be negative in some case).
Our client lifespan is over one year, whereas average clients in other brokers is around three to four months, so we don’t need a quick and fast recycle of clients. We don’t call a client in case of withdraw, we just send the money.
What is the advantage of running a real STP model and why do other brokers choose to pursue different options?
The advantage for us to run a real STP model so that we are don’t need a risk team to control each client. Instead, we need just to control the general broker exposure between our LPs.
We have a lighter business model than a normal B-Book brokerage. As we don’t have sales and retention, as we don’t spend millions in advertising and our fixed costs are really low.
So, we are able to better achieve profits easy and consistently every month. We cannot close a month in negative (such as the case with market maker brokers if clients are profitable) and instead we can have a month with more profit or a month with less profit.
Of course, the profitability per client is much less in this framework, but also, we try to target clients that are more profitable and that can trade with us for long time.
In this way we growth our profit over months, as old clients are still with us and new clients coming. As such we don’t have leads to buy, leads to call and convert.
We feel this model is more automatic, slim, and cost effective. Of course, we also recognize the market making business can be really profitable considering the percentage of retails clients that lose money is really high.
However, in market making business you have a lot of fixed costs with staff and marketing and in 2019 with ESMA, most of the market making brokers got a really strong hit in profits.
Does Pure Market offer tailored products for clients and how does the personalization of liquidity play into their offering?
We absolutely offered tailored products and this is our core business. For example, a partner or a professional client comes to us and we ask: tell me what you need?
And we try to design the product for them. We select liquidity venue based on style of trading, size of trading and instruments needed.
We select the final spread and markup they want, we can create PAMM, structure the introducing broker profile with different level so that the partner can develop his own network.
Can you tell me about your PAMM Program and what conditions exist for money managers?
With Pure Market it’s possible to became a money manager and earn not only rebates but also performance fees from the profit generated from the investors. We leave most of the decision to the Money Manager in how to set the PAMM.
On the investor side, the client can see a list of strategies that are working with us, select based on Max DD, performance and capital they are managing.
Before they invest they can set up a personalized Stop Loss that will stop the investment if the selected Stop Loss is reached.
All PAMM performances are expressed on equity base (not on balance) so to provide a more transparency to our clients and partners.
Does Pure Market have a white label product and do you foresee interest in these sorts of offerings growing?
Yes, actually we do. We just launched our site pure-partner.com where we provide more info regarding our white label products, with different packages.
In 2019, I saw really growing the offering as now is getting complicate for new brokers to get a license (even offshore) and set up proper payment system in a situation that is becoming more and more complicate, specially with banking system.
Right now, for a grey label set up where we provide: trading name under our own license, payment system, backoffice, MT4, liquidity, support, AML and KYC we can make it ready in 1 week.
Looking ahead to 2020, are there any industry headwinds that PureMarket is preparing for?
In 2019 we started with Pure Market UK so with FCA license that give us more visibility in Europe. Now our next steps are to define even more our market share.
We want to give more transparency to our clients and in the first quarter we have the plan to publish on our website the liquidity provider side of execution for each single trade we receive every day.
We will be integrating a page where each client that trade with us can clearly see that if is sending to our MT4 a trade, is actually reflected on same time on liquidity provider.
This will guaranty to our clients that 100% of our trades are STP and we are working on their side and not against.
Another concern that is now relevant for clients is safety of my funds. As we saw in past years, being regulated is not actually a guarantee that the funds are actually safe.
As most of the time, the regulators act only when the problem is too big to solve. Another point we are working on is to publish: bank statements and actual dedicated area on the site where a client can see how much money we receive and we send, were we send client’s funds (so we actually send to liquidity providers.
We also will work towards sending back key information to clients. This includes the coverage of a client’s name on deposit and withdrawal, but we will keep full transparency on all other movements on the account to show.
We will try to do what other don’t do. We have nothing to hide and we want to reach a point of full transparency that a client will feel more same to keep funds with us that his pocket.