A group of London-based Irish traders have set up what they describe as a “virtual hedge fund” to allow investors to track the best-performing traders.
Coalface Capital, which launches in London today, is an online platform that ranks and rewards independent traders on the basis of performance. It is able to pay traders by passing on 80 per cent of the revenue it receives from established trading platforms for retaining active and consistent traders.
Coalface has already signed partnership agreements with four leading online trading platforms: ADS Securities London, CMC, FXCM and FX Pro. The performance payout is weighted in favour of those who perform best – but also reflects the size and frequency of trades.
Once the platform reaches a critical mass of users, Coalface plans to deploy an algorithm, developed in conjunction with NovaUCD, to track its best-performing traders. This will allow it establish a virtual hedge fund for investors to track the positions of traders with the top-rated performance metrics.
Founder and chief executive of Coalface Capital Declan McEvoy, a former sales trader for Citi and UBS, likened the enterprise to an "Uber for the trading world": "Coalface is conceived and designed with traders' interests at its heart. There is a need within the industry for serious traders to be rewarded for their trading."
By paying traders, he said, Coalface would also reduce the temptation to over leverage that effects many independent traders. To become eligible, traders have to sign up to coalfacecapital.com but can continue to use their chosen brokers’ website as normal.
Coalface then receives a daily download of trading data from the broker, albeit with the traders retaining autonomy.
To create its league table, it will calculate each trader’s risk-adjusted return. Traders are rewarded monthly and 50 per cent of payment relates to how big the account is and how actively they are trading.
