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were focused on addressing this challenge for large, enterprise- level brokers looking to offer the MT4 Platform, and are now able to build on that technology foundation to offer routing and back office solutions to organisations that are continuing to cope with the rise in trade ticket volumes,”


Pressure cooker


As to what back office pressures are facing retail FX brokers, who are now having to cope with increasing trade volumes generated by high frequency, automated, mobile and algorithmic traders, Tom Higgins, CEO at Gold-i, comments: “Te ever-increasing number of accounts and transactions makes managing a broker’s back office a complex and error prone task. Many medium and large brokers are implementing the Gold-i Gate Link to connect their back office system to the front office trading systems. Using this approach they can have instantaneous access to all front office data in their back and middle office system, in true real time.”


“Increasing trade volumes are a blessing, as when people trade more, brokers prosper,” says Timur Latypoff, director at Tools for Brokers. However, he adds that supporting growth is not always a smooth process, as more brokerage firms are faced with the limitations of underlying technological solutions; trade servers work slower, failing to cope with high numbers of clients and trades, even becoming less stable. “Most of the problems can be mitigated by using third party solutions, but not all. Either way, it’s better to be prepared for them beforehand. When the lightning


strikes, things go awry,” Latypoff warns.


Latypoff continues: “Another issue is since high frequency trading is getting more and more widespread, traders search for (and eventually find,) better execution conditions. Brokers nowadays cannot afford to have execution delays anymore; everyone’s spreads are getting tighter and people understand that the golden days are over. Now only those who can show both top notch client service and outstanding technological advantage at the same time will survive.”


Te back office is always a contentious area and is even more so today, as the influx of trade volumes is multiplied by high frequency, automated, mobile and algorithmic traders. Doron Cohen, co-CEO at Leverate, notes that even more challenging than high frequency trading are the challenges that social trading present. Social trading requires coping with a diverse amount of trades, including high frequency trading, but increased exponentially by dozens or hundreds of copiers of successful gurus on social networks. Cohen continues: “Leverate solved this problem with LXRisk, a multi liquidity and full control risk management system, which not only supports Sirix social, but also shows the brokers full exposure per book as well as its P&L in a single location.”


Managing overheads


Increasing numbers of brokers are looking at reducing their market risk by offering STP and ECN trade execution platforms to high volume clients, which


Doron Cohen


“Uptime and reliability of servers is a huge issue for brokers, as poor performance affects the broker’s reputation and opens the broker to additional risk.”


necessitates the provision of access to third party liquidity providers. Ralich comments: “As any business matures, there is always a push to generate more predictable, consistent revenue streams. Tere are a number of potential incentives to managing client risk, but there is also a considerable amount of overhead involved in running a 24/7 desk, as well as market risks to take into account.”


He notes that, “By switching some, or all, of a broker’s client base to an agency model, both the overhead and revenue consistency become much more manageable. Most brokers already have third party liquidity available to them, which they use to manage risk and offset their own positions.


INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013 | 79


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