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Revenue growth


Ralich adds that one of the easiest ways to predictably grow revenue based on volume is to employ a pure-STP model, where the majority of revenue is generated through spreads and commissions. He explains: “Tis limits the swings in revenue based on client trading during the early stages, as the brokerage becomes more sophisticated in understanding its appetite for risk and clients’ trading habits. As a start up FX brokerage matures, it is most likely they will look to employ a combination model of Market Making and STP. It’s important to choose a technology that will be flexible to scale to either model as the business needs of the broker evolve.”


Behnstedt notes that for growth, differentiation is vital. “Fast trade execution is key, but again, the real competitive differentiation will be achieved by offering pre and post trade services in a way


that supports client business processes like they have never seen before,” he says. “One key topic here is how to leverage interaction between different technology solutions. For example, using the mobile phone, a limit order will be captured and based on a predefined threshold, and the user will be informed via his mobile solution that the limit order is now just a couple of pips away from being executed, then information about the execution. Tese kind of ubiquitous technology uses are facilitating the advent of business processes always at the client’s side. New appliances like tablets have also to be taken into account.” While Higgins says: “One of the first and most important decisions a new forex firm has to make is regarding risk management. How much risk is the company prepared or capable of carrying, and therefore how much business will they be looking to cover in the market?


Tis will guide their technology partner selection. If they favour Market Making, then advanced position monitoring, such as provided by the Gold-i Position Keeper, will be required, and if they prefer to STP into the market then a fast and reliable bridge is needed, such as the Gold-i Gate Bridge.”


Higgins stresses that good connectivity to liquidity providers for rates or for STP is essential and observes: “High latency or unreliability will have a major impact on profitability and client retention. Institutional firms opt for dedicated private wires between counterparties whereas nearly all retail brokers rely on the internet because of cost. Brokers should choose technology partners who will allow them the freedom to choose the liquidity providers that best meet their needs, and who are willing to customise and enhance their products if required.”


26 | INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013


Brokerage Operations


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