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Last week I was lucky enough to be treated to lunch by the Managing Director of IC Markets (Andrew Budinski) and his second in
command, (Angus Walker).
In the interests of full disclosure, I need to mention that we refer clients onto IC Markets and earn a rebate in return for these
referrals. So we have a financial incentive to promote them. However I would also like to state that I have a large amount of
personal money tied up with their brokerage. So I was keen to understand a little more about their business as a reassurance my own
money was safe on deposit.
IC Markets were the first brokerage to develop an IB relationship with us back at the start of 2013. Since then, I've worked closely
with Angus on a number of projects and he's always been easy to deal with so I was keen to understand if this was a result of the
MD's influence on the business.
From a physical perspective Andrew isn't at all what I expected. I had pictured an overly charismatic man that was 6'+ with a
lumberjack handshake, Rolex watch and perpetually vibrating hip pocket. In actual fact he is a slight build with a warm
personality and relatively casual appearance.
I was a little surprised to learn that he had no idea how much business we refer onto him and how much volume our clients were
generating. (I later found out we are one of their top IB's).
I've met dozens of brokers since I started this site and they all ask the same thing "how much volume do your clients do?". Client
volume is their meal ticket. The more we all trade, the more money they make and the bigger their bonus becomes. So the fact that
this guy had no idea how much we were trading was a little foreign to me.
Over lunch I began to understand why.
The size and physical space that IC Markets occupies is tiny in relation to competitors of similar size. If you were to walk into
their works pace you might think you'd found a satellite office where the accounting department sits, not the second largest brokerage in
Australia that is on-boarding 700 live clients per month from across the globe. The reason the business is able to grow at this rate
while maintaining a small workforce is due to the vision of the MD. Andrew isn't passionate about trading or the forex market. He's
passionate about building robust, scalable systems that give clients what they want. He is driven to automate the business as much as
possible by investing in IT and custom designed administration software.
This is why Andrew had no idea how much work we do together.
I wanted to use this meeting to poke a little harder at their business model and see if I could work out if they were b-booking
clients. A word of warning, every broker I've ever met says they are the only true ECN/STP broker and that everyone else in the
industry makes money by b-booking their clients.
The b-book model is incredibly profitable, this is why:
When a broker b-books a client it means the broker accepts the trades internally without putting the orders through to the
market. So they absorb the entire trade. If you win, it comes straight off their balance sheet. Conversely if you lose, they bank the
entire loss as profit. It's well known most clients blow their accounts within the first few months, so you can understand why so
many brokers are attracted to this model (even if they tell you otherwise).
I originally suspected that IC Markets were able to offer such tight spreads as a result of their increased profitability due to the
b-book model. So I asked Andrew directly - "Are you running a b-book allowing you to undercut the market on spreads and still make
money?"
Not surprisingly, he confirmed every trade placed through their brokerage was sent to the market for execution. The reason they're
able to offer such low spreads is a result of the multiple efficiencies within the business that drive down costs.
Andrew recognises clients don't really care about their broker having a fancy office with a view of the harbour. They care about low
spreads, fast execution and easy deposits/withdrawals. As a result he has driven IC Markets in this direction which then allows the
business to run on much thinner margins (lower spreads) than their competitors.
After spending a few hours with Andrew and Angus I was comfortable the broker is above board and feel confident that my money and
reputation is safe by continuing to do business with them.
command, (Angus Walker).
In the interests of full disclosure, I need to mention that we refer clients onto IC Markets and earn a rebate in return for these
referrals. So we have a financial incentive to promote them. However I would also like to state that I have a large amount of
personal money tied up with their brokerage. So I was keen to understand a little more about their business as a reassurance my own
money was safe on deposit.
IC Markets were the first brokerage to develop an IB relationship with us back at the start of 2013. Since then, I've worked closely
with Angus on a number of projects and he's always been easy to deal with so I was keen to understand if this was a result of the
MD's influence on the business.
From a physical perspective Andrew isn't at all what I expected. I had pictured an overly charismatic man that was 6'+ with a
lumberjack handshake, Rolex watch and perpetually vibrating hip pocket. In actual fact he is a slight build with a warm
personality and relatively casual appearance.
I was a little surprised to learn that he had no idea how much business we refer onto him and how much volume our clients were
generating. (I later found out we are one of their top IB's).
I've met dozens of brokers since I started this site and they all ask the same thing "how much volume do your clients do?". Client
volume is their meal ticket. The more we all trade, the more money they make and the bigger their bonus becomes. So the fact that
this guy had no idea how much we were trading was a little foreign to me.
Over lunch I began to understand why.
The size and physical space that IC Markets occupies is tiny in relation to competitors of similar size. If you were to walk into
their works pace you might think you'd found a satellite office where the accounting department sits, not the second largest brokerage in
Australia that is on-boarding 700 live clients per month from across the globe. The reason the business is able to grow at this rate
while maintaining a small workforce is due to the vision of the MD. Andrew isn't passionate about trading or the forex market. He's
passionate about building robust, scalable systems that give clients what they want. He is driven to automate the business as much as
possible by investing in IT and custom designed administration software.
This is why Andrew had no idea how much work we do together.
I wanted to use this meeting to poke a little harder at their business model and see if I could work out if they were b-booking
clients. A word of warning, every broker I've ever met says they are the only true ECN/STP broker and that everyone else in the
industry makes money by b-booking their clients.
The b-book model is incredibly profitable, this is why:
When a broker b-books a client it means the broker accepts the trades internally without putting the orders through to the
market. So they absorb the entire trade. If you win, it comes straight off their balance sheet. Conversely if you lose, they bank the
entire loss as profit. It's well known most clients blow their accounts within the first few months, so you can understand why so
many brokers are attracted to this model (even if they tell you otherwise).
I originally suspected that IC Markets were able to offer such tight spreads as a result of their increased profitability due to the
b-book model. So I asked Andrew directly - "Are you running a b-book allowing you to undercut the market on spreads and still make
money?"
Not surprisingly, he confirmed every trade placed through their brokerage was sent to the market for execution. The reason they're
able to offer such low spreads is a result of the multiple efficiencies within the business that drive down costs.
Andrew recognises clients don't really care about their broker having a fancy office with a view of the harbour. They care about low
spreads, fast execution and easy deposits/withdrawals. As a result he has driven IC Markets in this direction which then allows the
business to run on much thinner margins (lower spreads) than their competitors.
After spending a few hours with Andrew and Angus I was comfortable the broker is above board and feel confident that my money and
reputation is safe by continuing to do business with them.
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