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The rapid growth in retail FX means brokers are now facing an increasing deluge of back-office data to process which is further compounded by the need to meet new regulatory and client reporting requirements. Gerry O’Kane explores what pressures are being placed on back-office operations by the need to store and keep track of larger volumes of data so that these can be easily accessed, presented and actioned.


I


f you’d been working in the back-office of a foreign exchange broker ten years ago, you’d have been


ploughing through interminable list of clients and trades trying to reconcile deals and prices and wondering when your proverbial boat would come in. You may have relished your reasonably well paid job as a reconciliation and compliance specialist but you would still be facing a mountain of paperwork to deal with and sort out.


Since then, pressures on back- offices across the financial sector have continued to grow and FX brokers are feeling it worse then most. Exponential increases in FX volumes, smaller trade sizes, high-frequency trades and the increasing demands of more sophisticated retail investors are on the one side, while regulatory and reporting pressures are on the other. An industry that previously felt only the barest wisp of a touch from regulators, is now experiencing the shove of far more onerous reporting requirements from financial services authorities around the world.


Looking for solutions


As a result of these factors, FX brokers of all sizes are increasingly looking for solutions that can help them to better manage their cross-platform client offerings and consolidate their back-


office operations. As a result a number of technology companies have risen to the challenge of addressing the specific needs of brokerage firms, many of which cannot easily be addressed by the larger, more traditional institutional back-office systems available on the market.


US-based oneZero, is an example of one vendor providing retail FX industry software offerings. Te company is developing a “follow- the-sun” support strategy, and as part of these plans recently opened a London office in July 2012. “Te FX industry has a desperate need to automate, the bigger brokers who just employed staff to handle the back-office material are now in a tight situation with ever-rising costs. At many of the banks they’ve got legacy systems to handle these new demands but the days of a database of transactions being batch processed for a single FX daily price has gone,” says Graeme Watkins, head of business development and sales at the firm.


Tom Higgins, CEO of UK-based Gold-i, another leading brokerage systems specialist, agrees that the demand for more sophisticated back-office systems is on the rise: “It’s surprising but there’s always been a lot of people in the back- office. It’s a very manual process and the work load is increasing exponentially,” he says.


INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013 | 61


Higgins identifies a number of different things forcing FX brokerages to modernise their back-office: “Te numbers of retail transactions are increasing, pressuring reconciliation and risk processes. Tose trades are now split among multiple liquidity providers and the trades need to be captured and validated. With two-day institutional-style settlement times, brokers are finding it difficult to maintain instant profit and loss accounts and fulfil risk requirements.”


At the same time, e-markets and some liquidity providers require instantaneous pricing.


He adds: “Now that’s just plain vanilla FX trading, but when you have the multi-asset classes to handle – futures, rolling contracts


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