Being part of a team building an eFX product recently (ADMIS Global FX), I have learned that there are many things that contribute towards successfully offering eFX to our customers. Customer service, platform functionality, stability and a wide choice of FX products are essential. Nonetheless, pricing remains the core ingredient.
In order to safeguard and offer tight FX spreads, brokers must communicate and liaise closely with their FX bank liquidity providers. The banks do not know the identities of the broker’s customers, but, it is in the interest of the broker to be able to differentiate customer flow to the banks should a particular trading pattern raise questions. The broker can then remove certain customers from receiving price quotes from a particular or set of banks. Working together with the bank allows the broker to offer the best pricing available as a broker who does not engage with his liquidity providers risks the eventual widening of price quotes to all of their customers. Clearly this does not benefit the FX bank, the broker or the customer. In that sense, the importance of the “Know Your Customer” concept can be coupled with “Know Your FX Liquidity Provider” for a successful eFX business to grow.
IN ORDER TO SAFEGUARD AND OFFER TIGHT FX SPREADS, BROKERS MUST COMMUNICATE AND LIAISE CLOSELY WITH THEIR FX BANK LIQUIDITY PROVIDERS.
Nonetheless, different banks have different appetites for different business. There is no “one size fits all” in the eFX market as the customer receives a bespoke quote provided by the broker that is derived from a selected pool of market makers. It is the job of the FX broker to offer the best pricing available while keeping both FX market makers and customers satisfied. Of course, it is possible to trade FX futures as an alternative, but that’s a different story...
Please click here for more information on Foreign Exchange with ADMIS Global FX.
Patrick McBurney E:
patrick.mcburney@
admisi.com T: +44(0) 20 7716 8854
5 | ADMISI - The Ghost In The Machine | Q4 Edition 2021
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