Technology Elements of a Successful FX Brokerage


FX technology platform

The following guest post is courtesy of Adinah Brown, content manager at Leverate.

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Because there is such a high number of unregulated FX brokerages out there, pinpointing the exact number of established brokerages around the world is nearly impossible. However, MetaTrader4 reports that a total of 332 Forex brokerages use its trading platform, which is widely regarded as the industry’s standard. That’s a sizeable number, but as many as new brokerages pop up every month, an equally astonishing number drop out.

The reasons why brokerages go belly up are varied, but many do so because they go into business without a plan to scale up. As a brokerage’s client base and order volume grows, so does a dealer’s problems. For a brokerage to be successful, it is important that it establishes a plan to grow and that it chooses a technology partner that will support it along that growth journey.

What are some of the main features an FX brokerage should consider when choosing a technology partner?

Aggregators: liquidity aggregators are not a new thing in the Forex market. The fact that many brokerages have varied needs that are best served by multiple liquidity providers, have made aggregators incredibly common. When selecting technology that assembles a book of liquidity providers, or aggregates them, it is important to consider the following features:

  • Ability to set a variety of values on the different providers to be able to compensate the different trading conditions (markups) provided by each one.
  • Ability to set priorities between the different liquidity providers according to their adequacy index to regulate hedging.
  • Ability to filter out inadequate quotes without stopping quotes on fast fluctuations.
  • Ability to manage rejected orders.
  • Ability to manage multiple liquidity providers independently from one another, in order to prevent issues with one provider affecting the entire aggregation system.

Bridges: establishing a Forex brokerage is like putting together a puzzle and bridges are the technology that piece this puzzle together, allowing you to send pricing data and orders from one server to another. The most basic bridges merely allow information to flow back and forth between servers, while more advanced bridges have enhanced functionality. Some of the features you should consider are:

  • Making the offering of A/B book trading conditions, transparent to customers.
  • Hedging of individual traders as well as individual instruments. Partial hedging, manual hedging, and automatic hedging should all be available.
  • Protection against performance refusal, performance delay, or other errors.
  • Compatibility with external plugins.
  • High tolerance for faults resulting in no need for rebooting, and in the event of a failure, the bridge should not lose data.

Convenience: technology systems should be convenient for both the broker and the traders. Some of the features that provide convenience for the broker are:

  • Easy administration of trading conditions, hedging policies, connecting and disconnecting of instruments, tools and liquidity providers, easy monitoring of traders’ accounts and tools to react quickly when needed.
  • Flexibility to name trading instruments according to the brokerage’s own requirements, regardless of how they are named in the provider’s system.
  • Ability to obtain detailed reports about trading operations.
  • 24 hour technical and operational support.

Some of the features that provide convenience for the trader are:

  • High quality, stable execution.
  • Expanded functionalities to enable customers to protect themselves from risk and increase their trading efficiency.
  • Offering services that enhance operational transparency.
  • Ability to facilitate immediate withdrawal of funds.

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Technology Elements of a Successful FX Brokerage

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