@yhlasx Many thanks for pointing this out, and you’re right that this is a risk I’m very keen on managing.
First off - I agree this is a very sensitive topic that we’ll have to approach very carefully, as anything that’s intimately close to the vision, and your views are very welcome.
Second - a bit of context. The podcast that @Aimak mentions was part of a series where we’ve publicly shared some thoughts on the natural evolution required for Darwinex to achieve the vision. The first podcast was about potential enhancements to the trader compensation model (find ways to provide fix income so that longer drawdowns are easier to bear, etc.). In this particular program, we tacked potential improvements to the Darwinex model. This was one of several topics raised
Third - a reminder on the vision. The Darwinex vision is to be home to committed traders. We want the next George Soros to first hear about Darwinex at age 15, so that he’ll be making a killing from investors by age 20. For that to happen, nailing the investor promise & business model is a necessary ( offer great terms to the whizzkid), but not sufficient condition to bring about the vision.
Fourth - It’s not necessarily sufficient, because as things stand, young George Soros (and many of his potential retail investors) won’t hear about Darwinex until age 20, or until investors have quit. Before that, he will have wasted precious time in venues like eT…o, B.X and other places not as conductive to his growth (in my humble and vested opinion). He might choose to apply to Goldman Sachs or whatever, and then not contribute to our vision
Fifth - this begs the thought of whether Darwinex should better be offered to institutional investors who better understand the differentiation in our model. That’s food for another post, and we’ll talk about that in due course. Best to come back to our young Soros, for now.
Sixth - meanwhile, the reason things currently stand the way they do is because retail trading is a burn and churn game where 99.9% of intermediaries are gambling outfits that a) spend GBP 1200 to get a sucker in the door and b) make 2x-3x that suckers money. With our current business model, we’re servicing customers as per our standards, feeding consistently losing flow to the LPs (who therefore love us), and thus have a structurally lower margin than others.
Sixth - we’re evaluating “anti-DARWINs”, whereby every community member will be offered to take the other side of a DARWIN manager. E.g. Darwinex will be a marketplace matching long and short interest, transparently, without conflict. We had officially introduced these in the Spanish podcast (where we test community reception first I hope you’ll agree that offering anti-DARWINs squarely pre-empts any issues in that everyone will be allowed to short everyone else. E.g. unlike “market makers” we’ll democratize the right to be “the house” for every Exchange participant, and this is what makes Darwinex structurally different from any market maker on the slippery slope.
Seventh - nonetheless, there’s an area of potential savings that has come to our attention. Many PBs out there (including our own) run “aggregation” books, whereby they only offload risk to the market if and when tons of small tickets reach a certain size. E.g. instead of routing every micro-lot to the market, the way we’ve always done with them - they’ll “aggregate” micro order flow before off-loading if/when it hits e.g. 1 lot of aggregate exposure long or short a pair. They take our flow without slippage and charge us the going commission, without passing it on to the LPs.
Eigth - if that’s the case (and we’re pretty sure it’s the case), we’re being a tad moronic by paying PBs commissions for aggregating in a certain way which we’re entitled to with our new license, without a) contradicting the vision, b) taking on risk or c) (and most importantly) jeopardising our service to customers.
Ninth - We’re not talking pea-nuts here. Depending on where you set the aggregation threshold for “micro”, Darwinex could save several hundred thousand EUR a year, which frankly are better used paying new engineers to develop e.g. anti-DARWINs, than they are used by literally gifting our PBs with commissions for nothing
Tenth - I hope you appreciate that we’ve deliberately taken a risk by airing an internal debate publicly, and that I’m personally replying to this thread and outlining our thinking pretty transparently.
Either way, you’re right that taking any step (which we have not done to date) in this direction could be construed as the beginning of a slippery slope, and that’s the reason we’re totally open to answering any questions / concerns you might have.