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technology perspective, it’s very important for a broker to choose the right providers from the beginning. More and more brokerages are opting to outsource their technology in order to focus more on their core business and marketing. It’s critical for a new broker to consider how their technology provider will grow with them, and whether or not they are using a true technology provider or a hybrid brokerage/technology firm. Many ‘low cost’ or ‘turn key’ solutions end up creating a ceiling of control and flexibility that may be very difficult to break through as a broker grows,” he warns.
Yet setting up a brokerage firm in a market environment that is seen as ‘almost saturated’ requires more than ever specific focus on distinctive value propositions for competitive differentiation, observes Ralf Behnstedt, managing partner at FXA International. “Business and process items that are pretty much standard in every brokerage firm will not bring new clients on board. But there are quite a few items that a lot firms are outlining as business values, but that are difficult to deliver. Among those is, for example, a proper Introducing Broker strategy, proper business process and IT white label strategy and solution, or pre and post trade services.”
Regulation
Shmuely adds that apart from the technological and legal hurdles, many new brokers spend countless hours and resources looking for the best providers for various different products and services, such as website design, marketing services and live chat, to name a few. He continues: “Te importance of having a competitive edge over other brokers is the key to success when entering this industry, and there are many companies that can be found offering ‘turn key’ solutions, however most do not encompass every aspect of starting a brokerage firm. Partnering with an IT solutions company that offers not only a true turn key solution but also a one stop shop for all the necessities required to start a brokerage, is the ideal way to minimise the obstacles in starting a brokerage firm.”
Technology provision
Andrew Ralich, CEO at oneZero, comments on what needs to be got right from the start. He says, “From a
Meanwhile, Stephen G. Leahy, president at Capital Markets Access Partners, comments that regulation is the primary troublesome hurdle for start ups: “Regulation and capital are the primary barriers to starting a Margin Trading Products (MTP) brokerage (we define MTP as spot FX, CFDs and futures contracts). Tere has been a period of regulatory arbitrage whereby firms were opening up in lightly regulated jurisdictions, but we see those opportunities shrinking as the industry matures. We believe that regulators across the globe are inching closer to a level of cooperation never seen before and that the vast majority of the industry will fall under registration and regulation restrictions closer to those of the more developed regulatory regimes.”
“Tat leaves capital as a barrier,” continues Leahy. “Te increasing need for capital in the primary jurisdictions and increasing volatility of the markets mean no matter if a broker uses an STP model, a traditional dealing desk model, or a combination of both, there is a greater need for capital. An STP business model creates a higher return on equity to the brokerage ownership, but even STP brokers have increasing need for regulatory
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