Dialogue with EBC Group: Global asset allocation has entered a new cycle

The biggest driver of the market in 2023 is interest rates. Since 2006, the global storm triggered by the U.S. Subprime mortgage crisis has brought the global economy to zero interest rates or even close to zero interest rates. So in recent times and even over the past 20 years, global markets have become accustomed to operating at extremely low interest rates.

As central banks around the world continue to raise interest rates, we can already feel the squeeze on risky assets from rising interest rates. However, the deeper reason is that the market itself has not digested the impact of interest rate hikes.

I believe that global interest rates will remain the main driver in most markets through at least the first half of 2024. The interest rate hikes in the past period do had the expected effect, and the market predicts that interest rates will be cut starting in the middle of the year. If inflation continues to slow, risk assets could regain their appeal.

The trend of higher interest rates has already occurred in March 2022 when the Federal Reserve began to raise interest rates. After 11 times interest rate increases in the United States, although many people believe that the current interest rate is high, compared with historical data, it is only higher than the normal market interest rate level in recent years.

I agree with the Fed's view of pausing to raise interest rates but considering a new round of potential inflationary pressures and recent intensive global risks, I believe interest rates will remain high for a longer period.

Under the combined influence of high-interest rates, geopolitics, and inflation, market risks are more complex than expected. At present, the stock market, bond market, and housing market are already showing signs of weakness. But given the long-term impact of a rate hike, I don't think the market has fully priced in the negative. In contrast, as geopolitical risks intensify, the current risk-free interest rate reaches a high of 5%, which makes cash returns more attractive.

In terms of the stock market, I think the technology sector still needs to be watched with caution. Over the past 20 years, the development of the technology industry has mainly relied on free money. As market interest rates continue to rise, the technology industry faces higher costs of trial and error compared to the necessary innovation process, which may result in some profit selling.

The rapid rise in interest rates over the past year has exposed the market's deep-rooted dependence on a low-interest rate environment.

As early as March this year, the problems faced by second-tier banks in the United States were an example of insufficient liquidity, and the related bond markets were also disrupted. The illiquidity snowballed throughout the market.

I suspect this cycle of disruption will continue as the impact of higher interest rates ripples through the economy and consumers.

For clients, volatility and leverage go both ways. As a company regulated by the UK FCA, we clearly know that our responsibility is to help customers understand and manage both aspects. EBC has international first-level liquidity access, which can help users obtain better liquidity in the market.

In addition to providing deep liquidity, it is also important to use market-leading technology to match liquidity to clients. Our tools can provide them with the information they need to better manage trading exposure and risk.

The FCA has formulated quite strict regulations for licensed companies. First, it is necessary to understand the basic information of the account applicant through the account opening application form to classify the customer and take corresponding protective measures.

EBC can open FCA accounts of 100 times or more for professional investors. At the same time, the FCA Financial Services Compensation Scheme (FSCS) provides compensation protection of up to 8.5 pounds for each account, and investor funds will be independently managed at Barclays Bank.

Professional investors must meet the following requirements:

· Have already conducted transactions with a large amount in the relevant market, and the average transaction frequency in the past four quarters has reached 10 times per quarter;

· The size of the financial product portfolio (including cash deposits and financial products) exceeds 500,000 euros;

· Work in a professional position in the financial industry or have worked in this position for at least one year. The position requires knowledge of trading or related services.

During the process of users opening an FCA account, EBC subsidizes the certification and remittance fees throughout the overall process. 

Currently, most retail customers who use algorithmic tools are focused on copytrade or EA trading. However, this has brought about a "herding effect" to a certain extent. Many orders are similar or convergent, and even the entry and exit times are very similar, especially in volatile markets.

Institutional clients mainly use it as an execution tool to avoid adverse market fluctuations. 

As market volatility intensifies, when institutional users provide large amounts of liquidity to the market, they will hope that price decay remains stable for a longer period to resist as many short-term risks as possible and obtain two-way liquidity through algorithmic tools, thereby avoid adverse market fluctuations and reduce hedging friction costs.

Judging from market trends, algorithmic trading has become an important trading method. EBC provides a rich library of indicator tools, adapts to the MQL4 community, and introduces order flow tools. The addition of these tools can provide more comprehensive services for more diverse traders.

Sustainable investing opens up new audiences for derivatives trading.

Broadly speaking, these products create exposure for end-user management of ESG objectives. Currently, there are several broad categories of sustainability-related derivatives, including emissions trading, renewable energy and fuels, sustainable credit derivatives, and sustainability-related CDS. Institutions and investors use these products to manage, offset, and benefit from risks in sustainable investing.

EBC cares about our partners’ experience and understanding their perspectives on sustainability and ESG investing. In the future, we will expand our services to include access to CFDs and derivatives products to meet our clients' requirements and risk appetite. 

Creating a high-quality trading environment is not an isolated process. Our complete and professional team continuously optimizes every transaction detail according to users' needs.

For example, our advanced software and hardware ecosystem can take into account millisecond-level order execution and system stability. At the same time, our liquidity can provide five levels of quotation depth, and through the aggregation engine and intelligent order routing, we can greatly improve the order optimization rate, allowing more than 80% of orders were executed at better prices. These measures have greatly improved transaction smoothness.

In the future, we will continue to introduce new technologies and tools based on the existing ecosystem to ensure that all users can enjoy the most complete trading experience brought by a high-quality trading environment in EBC.