Founded in 2011, Scandinavian Capital Markets has grown to establish itself as a premier brokerage firm, attracting some of the best traders in the world. Michael Buchbinder has been instrumental in transitioning the company from its origins in wealth management into Sweden’s first STP-ECN forex broker. A partner at the firm for five years, he has a hand in all aspects of the business, including operations, technology, and perhaps most importantly, client relations.
In one of the most ruthlessly competitive markets in the world, Scandinavian Capital Markets has managed to thrive. Many brokers are offering the same platforms, regulation, customer service and are using the same marketing slogans. Can you talk about the characteristics that differentiate Scandinavian Capital from the hoard of fx brokers battling for market share today?
We are swimming in a red ocean in terms of the competitive landscape. How do we differentiate? By practicing what we preach. Understanding the value behind a relationship. Listening to the market and what they are asking for: a safe and reputable place to trade. That starts with a broker that doesn’t view its client as a deposit that they eat as a casino B-book. Too often they get lost in who their client is - and you can’t eat your client - you service your client. They thought extending the life of the client would help, but that just prolonged the slow death. To summarize, what differentiates us are these three things:
Caring about the client
Along with your partner Arif Alexander Ahmad, you have built an industry-leading brokerage firm from scratch, from the ground up. One of your strengths is a deep understanding of technology. Can you talk about how your insights into trader technology have allowed you to add value and provide custom solutions for clients?
More than technology it is about liquidity. Making sure the client can get the price they need. It is not about the lowest spreads. It is about the best fills for the order sizes they are clicking. As we deal with higher-end traders we are not so much competing on price, as price depends on order size, available liquidity and other factors.
You have talked about sourcing deep, customizable liquidity from top banks for clients. Can you explain how this works and how providing the best liquidity benefits your clients?
Having great liquidity means having great fills and volumes available for the traders. As price is a factor of supply and demand, some traders can have a market impact given their size of order and how they enter the market.
Toxic flow describes practices such as latency arbitrage or ‘picking-off’ the feed. Can you explain how this impacts brokerage firms?
Toxic flow impacts all brokers, A-book and B-book alike. Toxic flow is an attempt by the trader to take advantage of price movements unfairly, leaving the broker exposed to cover the client positions.
We want to work with the client to get their positions in the market. These traders have the mentality of us vs. the brokers. And for good reason, based on the ethics of the brokers that in my mind are the lead cause in this fragmented relationship.
Your prior experience showed you some uglier aspects of the forex industry. Can you tell us about how some of your harrowing experiences fueled a passion to create a new paradigm of prioritizing human relationships and service?
It goes back to seeing the inside of the business and the attitude towards clients. Clients are the life of the company. We talk to them, we become friends with them, we learn about their families, their hopes, dreams and desires.
I don’t like the idea of being two-faced. I want to be genuine and original, I value mutual respect. I want to earn your business. I am grateful for the opportunity to serve you and understand nothing should be taken for granted. As soon as I lose this, I lose your respect and your business.
White glove service is a hallmark of Scandinavian Capital Markets. Can you talk about how your relationship managers seek to provide a level of service more akin to a private bank?
I don’t think much needs to be said about this. Let us prove it to you. I don’t like to talk. I like action.
Yourself and Arif are constantly on the move, traveling the world to meet with clients. Having met many profitable traders and money managers across the globe, can you share some insights into the human traits leading to success in the markets?
The best traders are humble. They have been in it for years. They have had their share of ups and downs. They too don’t take things for granted. They do like to make sure they are dealing with the best brokers around and are very precise in everything they do.
Scandinavian Capital Markets is registered with the Swedish Financial Supervisory Authority (FSA) who oversee one of the most reputable and stable financial trading markets in the world. Can you talk about some of the advantages of working within Sweden’s secure and world-class financial system?
The confidence it brings to clients and investors is incredible. Sweden has a great reputation among the EU nations and the world-leading the way for innovation, responsibility and precision in engineering that they bring to everything in life here. These core values and ideals of Swedes is what is helping us restore faith in the industry and bring back a good name to FX and trading. Over 70% of traders are worried whether they can withdraw their funds from a brokerage according to an FXEye survey.
That is a scary thought and number. Yet people still trade because they seek reward for their risk. It is our job to give them a safer place to seek that reward for risk and eliminate as many of the external dangers or risks they might face.
The average deposit at Scandinavian Capital Markets is $100k or higher and the minimum deposit is $10k. Can you tell us why you chose to work exclusively with better capitalized, professionally-oriented traders?
There is no profit margin in serving less capitalized clients unless you are running a B-book. With higher capitalized clients we get more sophisticated clients. Fewer accounts being blown up and few to zero complaints as a result. Furthermore, I don’t need to have a large support team and we do not have a retention team.
All we have are support, admin and relationship managers. We don’t believe in selling, we believe in serving. Our actions will show our dedication to excellence: all centred around the client at the core.
The Valhalla Initiative invites clients and trading industry leaders to Stockholm to show them first hand how forex brokerage can be done better and get to know the team. It is also a cultural experience, offering a chance to experience some of the best that the Swedish capital has to offer. The effort is inspired by the great hall of Nordic myth, a haven of fairness and abundance. Like the mythical warriors wounded in battle who arrive in Valhalla, Scandinavian Capital Markets invites traders who may have been injured by bad experiences trading at other brokerages. As the Valhalla Initiative enters its second year, can you recount some of your favourite moments so far?
Every moment has been special. Getting to know about traders and their journeys. As I get more familiar with the city myself, each part of it holds a special moment with each Valhalla guest. Stockholm probably has some of the best culinary experiences you can find in the world. So I can say I’ve put on a few pounds getting to test out the great spots and meet the amazing people in the industry. The biggest thing I’ve learned is that we are a community and we are not trading alone.
This year we are looking forward to a number of influencers and market participants arriving in Stockholm to open up the debate, see where the industry has come from and where it is going next.
If Anton Kreil can hear me, I want you to come to Stockholm. I want to open up our doors and let you tell us how we fare, how we measure up. If we can get the approval of that badass I know we are well on the right track.
Beyond mythology, the culture at Scandinavian Capital Markets is aligned with traditional Swedish values, such as the concept of Lagom. Can you explain this word and how it is central to your approach to doing business?
Lagom revolves around the principle of enough. Not too little, not too much, but enough. Finance has become synonymous with greed. We like to think differently. Business does need to be profitable. It does need to be fair. It does not need to be evil and greedy. Especially at the expense of the clients or the people in the company.
We value our clients and we love our team. We take care of our team so they can take care of our clients. As a result of this, our company just keeps on doing better and better. Simple to say, harder to execute.
Scandinavian Capital Markets supports Bow Sailing, a non-profit organization in the Virgin Islands that gives children from underprivileged communities the opportunity to learn to sail. Ironically, despite having some of the best sailing conditions in the world there are relatively few native sailors. The initiative also cultivates teamwork, life skills, and mindfulness. At Bow Sailing, young islanders are provided with a unique chance to develop a love for the ocean and to excel in sailing. Can you explain why you chose to work with Bow Sailing and some of the parallels between sailing and trading?
There are lots of connections between trading and sailing:
Riding the waves.
Knowing who you are to master the beast (water and markets are the beasts).
Markets, like the water, are untamed and we are at their mercy.
We are the underdog and we like a good underdog story. People think the Virgin Islands are wealthy, but they are not. They get beat up by storms and they keep getting back up and rising up as a community. We got to know the people in the community and thought they are good people doing great work. If we can help them help a few more kids, maybe we can be a part of the difference they are trying to make.
Breathing and mindset are a huge part of traders getting control of themselves and their decisions and reactions. This is also an area of focus at Bow Sailing.
Tyler and Liz (the founders) are amazing. It’s an honor to get behind them and support their initiatives. They really put a lot of love back out there in the world.
Tyler Rice, the founder of the Bow Sailing, with his students.