Regardless of its tremendous daily turnover of $5.1 trillion, unmatched by any other financial market segment, high liquidity and seemingly numerous opportunities for profit from both positive and negative global events, the Foreign Exchange Market represents a volatile and risky environment, where security is increasingly becoming a luxury. As Forex is a space marked by relentless dynamics and increasing complexity, traders’ positions remain vulnerable to unexpected turns in sentiment. As a result, it is quite common for traders to face uncertainty, when it comes to their deposit safety and integrity.
Reality is that, until recently, many retail traders have overlooked the possibility of working with a trust company or a financial custodian for one reason or another. They may not have been acquainted with the actual benefits, which a potential collaboration with a registered custody service provider could generate, while also not being aware that their deposits could be safeguarded against theft or other unpredictable occurrences that have nothing to do with their market exposure.
By definition, custodians represent financial institutions responsible for safekeeping their clients’ funds, so that the risk of theft or loss is kept at minimum.
What we strongly recommend fund managers, private traders seeking protection of their funds against the risk of broker insolvency, as well as brokerages themselves is to open a custodial account through a Tri-Party contract agreement. In its essence, the custodial account represents a financial escrow account created in the client’s name and administered by a responsible entity (custodian), with the latter having a fiduciary obligation to the beneficiary.
What retail traders are able to take advantage of when using custodian services are a set of benefits such as:
– actual segregation of their funds from their broker’s operational accounts;
– safety of their deposits in case an unexpected event occurs (for example, their broker faces insolvency, or commits an act of fraud against them), which enables them to focus entirely on their trading strategies;
– strict monitoring over their transactions and a peace of mind that their withdrawal requests will be carried out without any obstructions.
Practice has shown that, in many cases, traditional custodians are associated with high-net-worth individuals, hedge funds, international corporations and other institutional clients. However, there is also a segment of companies specialized in the provision of custodian services to the retail side of Foreign Exchange. A typical representative of such a group of financial service providers is a RegTech company under the name of Etana Custody.
We, the founders of Etana, have long been aware of the need for better security for participants at the Foreign Exchange Market, as well as of the most common pain points they may encounter:
– Traders may not have experience or knowledge of the brokerage company they intend to open an account with;
– Traders may not find any reviews of the broker on the web forums, or the reviews may be predominantly negative;
– There is a chance that the brokerage company ”goes dark” on traders, withholds any generated profits or even manipulates their trading accounts;
– There is a chance that the brokerage company goes out of business, thus, traders suffer personal capital losses;
– And, last but not least, let us not forget the high level of risk related to transferring money abroad to unknown recipients.
Upon its entry into the retail Forex space, our company presents a new concept to market players aimed to resolve the long-existing conflict of interest between traders and brokerages. By taking the role of an active partner to both parties, Etana Custody grants traders the opportunity to choose their broker with greater confidence.
All in all, by employing the services of a registered custodian, traders benefit from:
– risk protection against unforeseen events and Forex scams,
– actual segregation of funds and
– maximum deposit security.
This way an environment based on trust is created for both traders and brokers, while the higher level of transparency and greater accountability make both parties feel less anxious when discussing transactions, disbursements and compliance procedures.
Brandon founded Etana Custody having experienced the various pain points that brokers and traders face. He spent more than 9 years consulting to these types of clients with a focus on managing risk, business sustainability and technology solutions. Brandon started his career at Liberty Life Group, focusing on investment products before moving into Foreign Exchange markets as a trader for a hedge fund in London. He has worked closely with technology companies in the retail FX space having held senior roles in sales and marketing.