Forex Blog: Currency Trading News & Analysis.

June 3rd 2011

Interview with FXStreet CEO Francesc Riverola: “I do not see a reason why spreads can not go down to zero.”

Today’s interview is with the esteemed Francesc Riverola, CEO of FXStreet. Below, Francesc shares his thoughts on the future of the retail forex industry, government regulation, declining spreads, and how he became CEO of one of the biggest online brands in forex without ever making a single forex trade.

Forex Blog: Could you briefly discuss your background, insofar as it brought you into the foreign exchange market? What were the circumstances under which you founded FX Street?

Hi Adam…Before anything, allow me to tell you that I’m a big fan of as you already know as I use to retweet or republish some of your posts. Congratulations for the great job you are doing!

I got involved in the Forex world in 1997 as a webmaster of a Forex advisory firm based here in Barcelona. The owner had heard from a friend at a Swiss brokerage firm that they were doing good business through the internet, so he wanted to do it as well. My task was to create a corporate site that should attract the crowd first and then generate clients from it. My strategy was to create a forex information site under the look and feel of a corporate site. Back then it was a pretty new formula so it worked wonders for them.

Back then, I remember printing  screenshots from Bloomberg station and introduce them by hand every hour 8 hours a day. In late 1999 the company was forced to close by Spanish CNMV so I found myself unemployed. As I had just started an executive program at Barcelona’s IESE Business School, I decided not to look for a job and give a shoot to an idea I had been developing for a long time. To create a Forex portal in English that would work to become a site of reference for Forex participants so I started early in 2000 with the help of a designer – my wife Miriam – and a programmer – friend of mine Setxi, now both my partners at

The success of the site forced us to create the company FOREXSTREET SL in 2001 and leave our jobs to focus just on the site. From 2001 to 2003 we invested long hours without getting paid as we dedicated the small revenue made to get help to make the site bigger and stronger. I remember the very first employee we had was my next door neighbor. As he did not have fast-Internet connection, I threw a cable from my place to his through the window… neighbors were wondering for many months what was that cable meant for 🙂

Forex Blog: Since you entered the forex business, the industry has clearly undergone a dramatic transformation. What do you think have been the biggest changes, both in terms of the industry makeup and the way in which retail traders interface with the forex market?

Everything is happening extremely fast… I still remember like it was yesterday discussing prices and ad campaigns with Lars Christensen, Co-CEO at Saxo Bank nowadays a firm with hundreds of employees or with Marc Prosser, former CMO at FXCM when the company had no more than 20 members staff.
Back then Forex was like the Gold Race in Wild West times. In the beginning, it was a race to find the right spot and get the most acres of land possible. Then firms settled down and had to run a business from it. A serious one. To do that, they had to keep “bandoleros” away – non-regulated firms willing to rip clients up – and to improve the quality of their cattle moving from dealing to non-dealing desk.

When the sheriff of the town (NFA) decided that party time was over, that was a big hit in the industry in the US and worldwide as many are following the NFA’s lead.

Even though I fully support tighter regulation, I think the NFA and the Dodd–Frank Wall Street Reform and Consumer Protection Act have gone too far, too concerned by the non-sense rates of losers in this market. I think the restrictions should be adapted to the level of expertise of the traders: advanced traders should enjoy of all the assets that make Forex trading attractive as they know how to use them wisely. And I’m not talking here about leverage, but FIFO or hedging. These restrictions should not apply to advanced traders.

The biggest challenge today for the Retail Forex industry is to break up with speed. Let me see if I can explain myself clear on that…. I think it has come the time to do things right and forget a little bit about the next quarter results or the next two quarters. Unless we all relevant market players focus ourselves on doing things right at this very moment, I do not think retail FX will become an asset class. In my view, it is time now to focus on the quality in the information offered in this market rather than on quantity. It is time not to focus on advertisement campaigns in order to get newbies with gambling spirit willing to burn their dollars to have some fun but to convince experienced traders from other markets of the benefits of FX,… to summarize… time for quality.

The Foreign Exchange Dealers Coalition (FXDC) was an alliance of the largest U.S. foreign exchange market dealers. The FXDC partnership was formed in the fall of 2007 to fight against the CFTC’s proposal to cap leverage at 10:1 among other actions. Finally the CFTC decided to leave it at 50:1.

I think it is time that this coalition rise up again to set up high ethical standards in the industry, to clean the name of the industry from press attacks and to avoid that double digit growth in Asia, Persian Golf and Eastern Europe is affected by the very same mistakes and situations that affected the growth in the US and Western Europe.

Today, for example, two new pieces of news criticizing the retail FX industry for its low levels of winners (30%) and for market makers acting as counterpart of traders were published in the Wall Street Journal. The journalists were saying that, unlike in Forex, brokers in Stocks look for the best prices for their clients. They did not talk about the huge problem of insider information in stocks and price manipulation by executives. This kind of press is bad if the industry really wants to become an asset class. The question here should be then: does the industry really want to become an asset class?… because maybe we are talking too much about this and there is no real interest for it.

Forex Blog: On the one hand, the forex market is the largest financial market in the world. On the other, most individual investors seek only indirect exposure to currencies, through international stocks, ETFs, etc. Would you care to offer some insight into this apparent contradiction?

As you already know, I’m not a trader myself so for me it is hard to detect the pros of other investment instruments over forex from the trader’s side. However I would say that there is some reluctance from experienced traders from other markets to fully moving into FX even though it’s maybe more appealing. That’s something the industry must deeply debate in order to find solutions for it. As I said before, there is something holding the move and we should all fight to take it away.

Besides reluctance, there is ignorance as well… Most uninformed investors (an this includes professionals as well) think in terms of absolute returns when investing in a stock, commodity or index. But they fail in thinking in relative terms: you may get a 20% return in a dollar priced stock, but if your domestic currency has devaluated 15% , your return is only 5%. From a risk/reward perspective those 5% can be quite costly.

Forex Blog: On a related note, do you think that forex will remain a niche investment product? Also, do you think that in the future, most traders will use integrated investment accounts rather than trading forex only through specialized forex brokerages?

Yes, I do think it will remain a niche if there is not a significant change in the way things are done as I’ve been saying above. A few days ago a Spanish White Label told me that CFDs are working wonders for him but FX is not… he was thinking of quitting as FX clients were lasting no more than 2 weeks before burning their account. They are even dedicating sales force to call clients and warn them they will burn everything up if they don’t change their strategies, but these clients don’t seem to hear them. I do not think this is the public this industry needs. It can be a great business for the market maker as it makes a lot of money from those guys, but to really become an asset class, that’s not the way to go.

Also, the current process of consolidation in the FX market through M&A is good on one side, as bigger and more serious firms are being created, but it is bad on the other side, as the industry is in the hands of a few. The courtyard of a few and that’s not good.

Regarding the second question, yes, I think the current trend for brokers is diversifying the pool of instruments traded including options, CFDs, ETFs, some commodities… I think they will include stocks as well soon…. A few months ago I asked a few brokerage firms how come they were not adding stock trading into their offering…

They all said it’s because of the lack of appeal of a market that is too much mature. Still they will not make much from that FX business and will not be able to attract serious traders now dealing with firms from other markets.

Today technologies in Forex enable the functioning of a decentralized market with its pricing mechanisms and the matching of orders. Internet itself is like a big Electronic Currency Network where a trader can opt to open a position where the best price is being offered at the moment. So I think, from a technological perspective, the currency spot market is making a huge difference.

Forex Blog: The last year has seen a number of regulatory changes to the forex industry. While leverage limits were lowered, transparency has been enhanced? Do you this will send the industry offshore, as some analysts have asserted? Or do you think this is but another step towards bringing the industry into the mainstream?

I do not think sending the industry offshore is the solution… well it is the solution if you plan to keep on the wave of big digits growth and want to attract mostly traders that will not approach the industry with the will to transform it as an asset class. At the same time, I’m not sure if FX should become mainstream as it requires a level of sophistication mainstream does not have. I think it must become an asset class for serious traders and should be kept as far as possible from gamblers and aggressive newbies.
Less than 10 years ago the UK firms had retail FX at their feet and they lost it against smaller, faster and smarter US firms. Now the US companies dominate the industry and the change to asset class must come from there.

Lowering leverage can be beneficial to prevent market prices to be less violent but on the other side it can reduce liquidity because of lack of interest. Any market needs a certain amount of liquidity and volatility in order to attract investors.

Forex Blog: I understand that you aren’t much of a trader yourself. (I hope this isn’t a secret?) That being said, you must have some insight into the different approaches that traders use, if only due to your role as CEO of FX Street. Can you comment on how traders are changing? Are there perhaps some tools/strategies which are fading, and some which are rising to replace them?

No, it is not a secret at all. I’ve always told everyone that I’ve never placed a trade in my life. Well… twice in stocks 10 years ago and I still regret it. I do not have any of the necessary skills to be a successful trader: discipline, planning, consistency, patience… I’m lacking of many of these skills so the smartest thing to do is to keep myself away… away not just from FX but from any other financial market. They are not meant for me.

Also, as a CEO of I think that my lack of trading understanding benefits the site as I’m open to all views and strategies. I’ve been with FX traders the last 11 years and many of them show the same pattern: they are not open to those that do things differently and they believe that what they do is the right thing or that it is the only truth. My lack of knowledge keeps me open to all views and I think as a global portal must be open to everything.

How traders are changing? I’ve noticed that traders are getting more and more sophisticated and more demanding… and these are excellent news. The more sophisticated they get, the better.

Forex Blog: I recently posted about the rise in computerized / high-speed trading. Do you think this threatens the viability of retail trading? Do traders need to adapt?

I do not think it threatens the viability of retail trading at all… computerized/high-speed trading is becoming a need for retail traders too. It is covering the needs of a growing segment of the market that requires it, this is it. I do think that high-speed trading will make retail trading bigger and stronger, and it requires a level of sophistication that can help to keep gamblers away.

Also, I don’t think that basic postulates of technical analysis used by most traders (retail and institutional) are being threatened because of the rise of HFT – those models are ultimately based on human assumptions and expectations which rise price trends. Markets are not becoming totally efficient because of HFT, but they are becoming more liquid, which is a good thing.

Forex Blog: The last few years have given rise to a massive online community of forex traders? How can traders use this community to their advantage, and how can one separate the wheat from chaff?

The growth of interest for FX in Asia in the last few years is outstanding. Currently, India, Singapore, Hong Kong, Indonesia, Malaysia are among the top 10 visiting countries to visit Since May 2008, visits from India have tripled and they have doubled from Malaysia and Indonesia. Also, visits have doubled from United Arab Emirates, UK and Australia, while in the States the growth have been only of 50 percent. That’s a proof of the world wide nature of this market.

Traders are already using this huge community to their advantage. Forex Factory is a huge forum and the biggest FX site on the Internet. There you get 24/5 assistance from other traders. Babypips is another Forum to assist beginners. Now Social sites are the new fashion kids in town. is experiencing a tremendous growth, our own social site is growing at a rate never seen in this house… I think traders are playing well their cards overcoming the loneliness of trading building up a network of friends or trusted sites that backs them up in their decision making process.

Forex Blog: For a number of reasons, forex spreads are continuously narrowing. Do you think this trend will continue? Will we soon see spreads of less than one pip for all major currency pairs?

The narrowing of spreads has been an irresistible move as the competition in the market is fierce. Now it seems there is a big resistance level at 1 pip, but this level will be overtaken sooner or later. As long as there is a counterpart and volume business I do not see a reason why spreads can not go down to zero. The spread commission is just peanuts compared to the others.

On the other hand, the industry still has a long way to go in controlling spreads when picks of volatility happen. The last move for the industry is to provide liquidity in order to add more pairs to their offering.

Forex Blog: Finally, how is Forex Street positioning itself to remain at the forefront of forex? What bets are you making from a corporate standpoint, and to what extent do these bets reflect changes in the forex industry?

Our goal for the last few years and specially for this one is quality. We are switching from quantity to quality and believe me, it is not easy.

We want traders to use our site because it helps them in their daily trading activities, in their education and in their efforts to socialize. If traders come to our site and find the best content they could find on the net about that specific topic they were looking for, we will be satisfied.

As I just said, our three bets are daily trading activities, education and social networking.
Daily trading activities are being approached by a web site redesigning, launching of new versions of our key contents and collaboration with some of the most brilliant minds in the field to offer traders new tools to analyze the market behaviors. Here we are collaborating with minds as brilliant as Richard Olsen, one of the founders at Oanda, and Mark Whistler.

Education is being addressed through our Learning Center. The LC is the toughest A to Z course on Forex you can find on the Internet. We did that on purpose; to master Forex is not easy, so the learning experience on our site had to be extremely difficult. Just a few traders are daring to take our tests with over 400 questions per chapter. Not an Internet friendly resource at all.

Social networking is being covered with The site is another way to socialize completely different to a forum, where we can not dream to be but a shadow to Forex Factory.

At this moment, this is all I can disclose. More to come in the next few months…, some good surprises coming along 🙂

A pleasure to speak with you Adam.

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Posted by Adam Kritzer | in Interviews | 2 Comments »

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2 Comments of “Interview with FXStreet CEO Francesc Riverola: “I do not see a reason why spreads can not go down to zero.””

  1. Bonnie Smith Forex Says:

    Nice interview and its reply …

  2. marc Says:

    Interesting and insightful interview. Thank you very much.
    I didn’t knew that the fxstreet CEO never traded forex himself.

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