Jiří Filip A lot happened in the financial sector during March. We've seen the collapse of major banks, high volatility in financial markets, and confusion among local investors regarding ETF offerings. Vladimír Holovka, XTB's commercial director, answered all these topics.
In recent days there has been a lot of talk about competing brokers pulling many popular ETFs from their offer, could this be the case for XTB as well?
Of course, we noted this current topic. From our point of view, XTB continues to fulfill all the necessary requirements of European or domestic regulation. XTB provides Czech or Slovak versions of Key Information Documents, abbreviated KIDs, for its own issued investment instruments. In the case of ETF instruments, XTB acts in a so-called execution-only relationship without consulting, i.e. the obligation of local versions of KIDs according to the CNB does not apply to these cases. So XTB can still provide without problem ETF to our existing and new clients, in addition no transaction fees up to €100 per month.
Currently, many banking houses are under pressure and some are struggling with existential problems. Is there a risk of something like this with a broker?
Generally speaking no. The point is that business the model of a bank and a brokerage house is very different. Regulated and licensed brokers within the European area are obliged to register client funds and investment instruments in separate accounts, other than their own ordinary ones, which are used for the running of the company. Here, in my opinion, is the fundamental difference from traditional banks, which have everything in one pile. So if you have a large broker with many years of tradition, which has and complies with regulation within the EU, then you can sleep peacefully.
In the event of a hypothetical bankruptcy of the brokerage company, will the clients lose their assets or securities?
As I mentioned, regulated brokerage houses record client securities and various assets separately from their funds. I mean if there was a crash, the client's investment should not be affected. The only risk is that the client will not be able to dispose of their investments until a trustee is appointed to decide how to dispose of the clients' assets. The clients will either be taken over by another broker, or the clients themselves will ask where they want to transfer their assets.In addition, every broker is obliged to be a member of a guarantee fund, which can compensate damaged clients, usually up to approximately EUR 20.
If someone is currently looking for a new broker, what aspects should they look for and what should they watch out for?
I am glad that over the past 5 years, the brokerage market has become quite cultivated and there are fewer and fewer of the less serious entities. On the other hand, this difficult time of higher inflation and slowing economic growth is appealing to those who want to lure the less cautious and offer some guaranteed returns with minimal risk. So that's the reason to always be careful. A simple filter is whether the given broker is under EU regulation or not. Non-European regulation can make the situation very complicated for the investor if he is dissatisfied with any of the broker's activities. Another factor is the broker's tenure.There are entities that intend to harm their clients, and once their reputation is somewhat bad, they close down the original company and start a new entity - with a different name, but with the same people and the same practices. And this is how it repeats. This usually does not apply to end brokers, so-called securities traders, but to their intermediaries (investment intermediaries or tied representatives). If, on the other hand, you choose the services of an established broker with many years of experience, you probably won't go wrong.
How does the current situation on world stock exchanges affect your activities and the activities of XTB clients?
When the markets are calm, the brokers are also relatively calm. However, the same cannot be said about the last few weeks. There are many events in the markets, and the movements of the world's stock exchanges are significant in both directions. Therefore, we also try to be more active and inform our clients at an increased pace and volume, so that they can better orient themselves in a rapidly changing environment. It's still true that once something happens in the markets, it attracts the attention of all types of traders and investors. Investment opportunities with an interesting discount are offered for long-term investors. On the contrary, for active traders, greater volatility is always welcome, as many short-term opportunities appear, both in the direction of price growth and in the direction of price decline.However, everyone must decide for themselves whether they want to take advantage of these situations or stay out of the market. Of course, nothing is free and everything carries risk, you know every active investor must be aware of and be able to evaluate these risks in relation to his investment profile.
What advice would you give to existing investors and short-term traders in this situation?
Take advantage of opportunities but keep your cool. I know it may seem like a cliché, but time doesn't always flow in the same way in the financial markets. Sometimes as many events and opportunities take place in a few weeks as sometimes take years. I mean it is necessary to be all the more active in these times, to do your homework in the form of study and analysis, because if you are well versed in the moments when the markets go crazy, you can get a very nice head start for your trading and investment results.However, if you do not act prudently and with a cool head, then on the contrary, you can get a nice earful from the markets. Or, as I mentioned, you can stay out of the market, but then you can't blame yourself for not buying it when it was so obvious.
Is XTB planning anything interesting in the near future?
Coincidentally we are planning the next year for Saturday 25 March Online trading conference. Considering the current events in the markets, we have relatively good timing, as we once again managed to invite a number of experienced traders and analysts who will certainly help all viewers to get their bearings in the current situation. Access to this online conference is free, and everyone gets a broadcast link after a short registration. It is necessary to constantly develop and adapt your approaches and strategies to the current market environment.
Does the trading conference mean that it is really only for short-term traders, or would you recommend participation for long-term investors as well?
It is true that many of the principles and techniques will be aimed more at short-term traders. On the other hand, for example a detailed analysis of the macro environment and some implications for the development of the coming months will also be appreciated by long-term investors. For example, XTB analyst Štěpán Hájek or private equity manager David Monoszon will provide their insight. I'm not only looking forward to their outputs, because they can place macroeconomic developments, the role of central banks and, last but not least, the activity of individual market players in a broader context.
Vladimir Holovka
He graduated from the University of Economics in Prague, majoring in finance. He joined the brokerage company XTB in 2010, since 2013 he has been the head of the sales department for the Czech Republic, Slovakia and Hungary. Professionally, he specializes in technical analysis, creating business strategies, monetary policy and the structure of financial markets. He considers consistent risk control, proper money management and discipline to be the conditions for long-term successful trading.
I consider the article misleading.