While small and large brokerages are falling like nine-pins under the assault of rapidly diminishing liquidity, ADS Securities says it is thriving. Zawya interviews MD Philippe Ghanem to find out why.
ADS Securities was established as a forex and commodities trading firm in March 2011 with an initial capital of USD 400 million. This was at a time when brokerages in the region, and the UAE in particular were being forced to shut shop by the difficult conditions in the market. This trend continues. In spite of investors and liquidity deserting the markets, ADS says it has notched up billions of dollars in daily volumes.
Founder, managing director and vice-chairman Philippe Ghanem says he felt the need for a world class forex and commodity trading partner offering excellent customer service and located in the Middle East - mid-way between the markets in the Far East and Western Europe. With considerable experience in the trading of a variety of financial instruments as well as core asset and fund management, Ghanem is seen as a global forex specialist who has unrivalled contacts across international markets.
Zawya asked Ghanem some difficult questions to get a take on ADS's unique selling proposition, the forex and commodity markets in general, and the strategies needed to thrive in such a market. Excerpts from an interview:
Why have you launched a brokerage when so many around you are closing shop due to the absence of any significant business?
Regional brokerages trading equities have faced a very difficult time. Local markets have suffered from a lack of liquidity and investors have been hit by extreme market volatility which at times has seen double digit drops in value in single trading sessions. ADS Securities trades FX and commodities which offer liquidity, 24/6 trading and the ability to enter and exit as and when the investors want. This is why ADS Securities continues to sign clients on a daily basis and has in eight months from set-up, reached trading volumes of billions of dollars daily.
From where - geographically and sectorally - do you see the maximum business for ADS coming in 2012?
We are looking for growth across the MENA region and out of Asia. These will be two growth markets for us in 2012.
Why do you believe there is enough liquidity in the FX, commodities and bullion markets to support your operations?
ADS Securities works with some of the world's best prime brokers and liquidity providers. Our high level of capitalisation of the business gives clients access to deep liquidity as and when they needed it. In addition we are able to access regional liquidity which has been relatively untapped. This makes ADS Securities a very compelling offer to everyone from high net-worth professional investors through to global institutional investors.
In your view, what is the effect the Eurozone situation has had and will have on other currencies and investable assets?
The Eurozone situation has caused on-going instability in all financial markets and across all asset classes. For FX investors this has resulted in the volatile market conditions which stimulate FX trading. The issue has been the impact on equity markets which have declined, globally by 12% in 2011, a loss of USD 6.3 trillion. Liquidity for this sector is predicted to remain tight through 2012 which is not good news for equity investors. For this reason we are anticipating that more investors will look to FX as the market is highly liquid and allows them to enter and exit positions as and when they want.
What strategy would you recommend to a currency trader/investor over the next three and six month time frames?
We do not advise trader/ investors on the strategy they should take. Our role is to offer investors superb access to regional liquidity, tier 1 liquidity providers and the tightest spreads available. Across the MENA region we are looking to help and educate investors who want to trade forex and commodities. We want all our clients to be successful with their investments, we want them to come onto our platform and keep trading so the more information and advice that is available, the better. Furthermore, we would reinforce the importance of trading on a well capitalized platform in a well regulated environment.
Are commodities and bullion still being used as a hedge against uncertainty in stocks and currencies?
Two years ago corporations, family offices and individuals may have looked at commodities and bullion trading as a hedge, now these investors will almost certainly see them as a key element of their portfolios. There have been ongoing issues with stocks, caused by weak markets and a lack of liquidity, but currencies and commodities have not been affected in the same way. Currencies have been volatile but trading continues to increase as the asset class is liquid and allows investors to open and close positions as and when they want.
What is your short and medium term outlook for gold and oil prices? What are the drivers?
We do not offer advice on commodity or FX prices, so cannot comment in detail. In general terms over the last few years' commodities have increased in price as they have been seen as safe havens for investors. With the continued uncertainty in global financial markets it is likely that investors will continue to value lower risk or lower volatility asset classes.
How have MENA region trading volumes in FX, bullion and commodities moved over the past 6 and 12 months? What are the drivers?
The global market for FX has increased significantly over the last few years. Figures from the Bank of International Settlements show that from April 2007 to April 2010 average daily turnover in FX increased 20%, rising to USD 4 trillion. This rate of growth is mirrored across the MENA. FX is now the single largest traded asset class globally. Similar increases have been seen in commodities, especially in bullion.
What is your overall view of markets and investment opportunities in the MENA region in 2012?
Recent independent research commissioned by ADS Securities indicated that high net worth investors in Qatar, the UAE and the Kingdom of Saudi Arabia believe FX and commodities will be the most sought-after asset classes in 2012. Given the activity we have seen on the ADS platform, these findings come as no great surprise. The liquidity, ability to enter and exit positions and the issues facing other asset classes provide strong reasons for investors to look at trading FX and commodities. It is also anticipated that there will be an increasing trend to trade regional currencies, even those pegged to the US dollar. This could include the trading of currencies which have been hit by regional unrest, such as the Egyptian pound.
© Zawya 2012
