By Monica Mehta
Every day as much as US$5 trillion flows through global foreign currency exchanges (Forex), where valuations are in constant flux—influenced by predictable forces (such as monetary policy) and surprise events (such as a natural disaster). This is the world’s most active marketplace, and according to Hiroyasu Kito, CEO of GMO Financial Holdings, a microsecond can mean the difference between a profit and a loss.
As leader of GMO Financial Holdings and GMO CLICK Securities since 2014, Kito speaks of the importance of providing easy-to-use services at low cost to make customers happy and satisfied and succeeding in offering online services, including services his company provides to the domestic retail Forex market in Japan. Moreover, a focus on those simple principles has translated into success; GMO CLICK Securities has been the world’s largest Forex brokerage by trading volume for seven consecutive years since 2012, and GMO Financial Holdings posted annual profits of 7.7 billion yen (US$69 million) in 2018.
He also emphasizes the importance of speed. “Our monthly Forex transactions sometimes amount to over 100 trillion yen [US$8 billion] when the Forex market is active. In order to process such large transactions, speed is the key,” says Kito, who, as leader of one of the world’s leading Forex brokerages, understands the inherent risk in latency. “Pricing changes continuously, so a time gap between when an order comes in and when the processing is completed is a risk that needs to be minimized. Also, in the aspect of customer satisfaction, accelerating order processing speed is very important.”
GMO Financial Holdings
GMO CLICK Securities installed Oracle Exadata to enhance its Forex system in 2016, which has helped accelerate the pace of transaction processes by six times the previous rate in the company’s staging environment. “This has had a big impact on us, and I think this amazing technology brought us to the next level,” says Kito. Here, Kito talks to Profit about a variety of topics such as his strategy for succeeding in the volatile Forex business, the way to utilize artificial intelligence (AI), and the importance of laughter in the office to build a great team.
Profit: GMO Financial Holdings opened for business as GMO CLICK Securities in 2006. What was the strategy behind this entry into the Forex business?
Kito: We chose to start our business in the financial service industry because there was room for improvement. We wanted to make the existing financial services at that time more reasonable and simpler to use. Also, the industry has high entry barriers for new players, which means fewer competitors for us. So we saw an opportunity, and we were convinced we could build a better trading platform, utilizing our ideas and technologies, to compete in this market.
Profit: How important is fast transaction processing to the health of your business?
Kito: For our business, having very rapid transaction processing speeds is one of the most important factors for success. For certain transactions, having very long processing time or latency translates into risk, because pricing changes quickly. In order to minimize the risk, having shorter processing time is very important.
Now, we’re measuring in milliseconds—but we are trying to get into the microsecond world.”
Currently most of our Forex business is with retail investors; however, in 2020 we will be expanding our offering to support business-to-business transactions where rates will be checked automatically. So the key for success in B2B business is how fast we will be able to present rates. Now, we’re measuring in milliseconds—but we are trying to get into the microsecond world.
Profit: So it seems like intelligent machines are already having an impact on the Forex market. What role do you see for AI in your business?
Kito: We are currently trying to utilize AI to help manage risk—for example, preventing illegal transactions such as money laundering.
Also currently we’re trying to integrate AI and financial engineering logic for the B2B business, where how fast exchange rates are generated is very important. This is just an idea, but I’ll give you an example. It’s difficult to forecast the dollar/yen exchange rates, but with AI, predicting the price one day from now might be possible. If it’s one hour or seconds from now, it would be much easier for AI. If the accuracy of this calculation continues to increase, we believe we will be able to generate our rates faster and our profitability will be improved significantly.
Profit: So what is your strategy for succeeding in today’s dynamic and volatile market? In 2018 there were discussions about rules and regulations in both the Japanese Forex and cryptocurrency markets.
Kito: In every way, I believe speed is very important. For example, regarding regulatory changes that all players need to comply with, the key is how quickly we can see these changes coming and adjust to them in comparison with our competitors. It’s very important to have rules to protect customer assets, so if we keep an eye on what’s important for customers and what’s happening in the world and observe the actions of regulators in this respect, we can anticipate what’s coming.
However, speed is not just important with regulatory issues. Another example is when the iPhone first came to Japan—I was certain this device would take over the market, and that is why we were one of the first to develop a transaction app for the iPhone in Japan. We gather information as quickly as possible, create a plan, and execute it—and running the cycle more quickly than the competition is the key for us to win.
Currently we're trying to integrate AI and financial engineering logic for the B2B business, where how fast exchange rates are generated is very important.”
Profit: What do you think are the key factors for success in new markets outside of Japan?
Kito: Each country has a different culture, customs, and characteristics, so what’s important in overseas business is good localization. However, it’s extremely difficult to capture and satisfy local customer needs completely. So when I think of global expansion, it’s best to leave business to a local management team, and that’s what we do for our global business for the retail market. I also see B2B opportunities in the international market. We want to reach customers outside of Japan via foreign financial institutions. We have liquidity that supports the world’s largest volume of retail Forex transactions, so as long as we create the rates that are most attractive to the global market, they will choose to do business with us. That’s why we’re currently focusing on building a system that enables us to continue to lead in this area.
Profit: What is your strategic vision for the company in the near future and beyond?
Kito: Our strength is in Forex business. We’ve been focusing on enhancing the Forex business for domestic retail customers, and we became the world’s #1 Forex brokerage by volume in the area. Now it’s time for us to expand our business to facilitate B2B services. Our present goal is to be #1 in the B2B Forex market as well.
In that sense, I’d like to create the best team to achieve the goal. Internet-related businesses don’t have geographical limitations, which means we can do our business anywhere in the world. So I want our company to fully utilize that fact and our strength so that we can compete using ideas and technologies. With the best team—which doesn’t need to be particularly large in numbers, only 300 to 500 members—I’d like to create and promote our values throughout the world to customers. The reason why we have been able to survive in this dynamic industry is because all members are proud of their job. They come up with ideas, discuss them, and make plans to navigate quickly—we will continue creating new values and deliver them to the world.
I think the important thing in creating the best team is to have a culture where members can be themselves. At some other companies in Japan, when people go to work, they equip themselves with armor and create a different personality. Our company is very unique—I believe we are almost the same when we are at home and when we are at work. Our members are themselves. At the office, we hear laughter all day. I think this allows us to be creative and generate good ideas and do good work. We aim to be the best in the world with the best team.
Photography by Christopher Jue/Getty images