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Configurability, reliability and performance are the three key areas that should influence a broker’s choice of liquidity bridge provider, according to Ralich. He explains: “Te bridging market has evolved to a point where being fast and stable is no longer the end of the conversation. Anyone shopping for a bridge in the current market needs to dig deeper into what back office and reporting tools the provider has built into their system, as well as what capabilities the bridge has beyond just routing trades. Solutions for failover, aggregation, and smart routing should be in consideration.”


Ralich continues, noting that care is needed: “If you are looking for a MetaTrader4 bridge, an important consideration is how the bridge interfaces with MT4, and the provider’s experience with that platform. Many of the ECNs (such as Currenex and Integral,) are now offering their own bridges. Te assumption by brokers is that a large provider will obviously have a stable solution for adapting into MetaTrader4, but they neglect to stress test the specific components that interface the ECN with the platform. Many companies have found that though the ECNs are very capable of managing trade routing, they are not as experienced with MetaTrader and thus their internal solutions are years behind the third party bridge providers in terms of reliability and performance.”


However, Latypoff says the first point to consider is price. “Te price tag is essential for most companies, since STP is inherently much less profitable than market-making, and every


extra per volume fee directly decreases amount of money the company makes,” he says, continuing: “Secondly, it’s trust. Liquidity bridges are a piece of software that deals with clients’ money directly, therefore there should be strong trust relationships between technology provider and brokerage firm. Most software license agreements, if you read them carefully, don’t guarantee you much, and if something happens (and things happen when you expect them least,) it’s not a court decision that will help you, but people who you trust.”


“Tirdly, I think it’s competence,” continues Latypoff. “It’s a good idea to buy software directly from vendors, as only they can usually provide quality and timely support. Any third parties in between would work like a broken telephone, not something that anyone would want,” he claims.


The future


Going forward 12 months, Higgins says: “Vendors who will be thriving in the 2012 and 2013 will have a full service offering, covering not just liquidity management, but also back and middle office integration and add-on tools to manage risk and increase profitability.”


While Latypoff says: “From what I see, in a year more and more platforms will be connected to each other, providing and consuming liquidity at much larger scale. For traders this will mean tighter spreads, faster execution, less slippage, higher available trade volumes, more tradable instruments, and, most important, higher transparency,


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


where it will be possible to validate most or every trade, and ensure that forex is a fair and civilised market.”


“Online trading is not immune to the sweeping paradigmatic shift of social everything,” says Cohen. “Te next 12 months will be all about the marriage of online trading and social networks. For this reason we have released a new version of LXRisk, essentially a risk management system on steroids, with more than enough muscle to face the liquidity and risk challenges that social trading presents.”


Ralich says the leaders in the bridging industry will continue to evolve and capture more marketshare not by simply riding the wave, but by building on their existing foundation and continuing to differentiate themselves. He explains: “Brokers need to take this into consideration when choosing a provider. Tere will be fewer newcomers and more bridge companies falling to the wayside over the next 12 months, so choosing a provider with proven staying power is important. Te companies to rely on for technology over the next 12 months are the ones who will continue to evolve their offering, and capture more value for the broker, not just in simple bridge integrations but also as a provider of back office, smart routing and other technologies.”


“Even if you just need a bridge today, it’s important to consider what you will need two years from now and look at how the different offerings have evolved over the past two to three years,” Ralich concludes.


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