Can combining A-book and B-book execution be the antidote to negative client balances? So says Synergy FX

Australian Forex broker Synergy FX has announced today that it is now accepting client applications for its new SynergyHybrid ECN account type, less than 2 weeks after extreme market volatility was caused by the Swiss National Bank having removed the 1.20 peg on the EURCHF pair.

Swiss National Bank intervention on January 15 this year resulted in a series of companies having been exposed to negative client account balances, which in some cases they might be required legally to repay.

For some traders, the exposure to risk culminated in a disastrous outcome to their trading endeavors, and indeed their very financial security in some cases. Entire institutions have been left vulnerable, with some not having survived the event at all, with administration proceedings having commenced. The question of risk management has been raised among regulators and industry participants, with a need to look toward safeguarding corporate operations and client accounts should a similar event occur.

One method is to adopt a hybrid execution model, which incorporates certain aspects of the A-book execution method, in which all order flow is passed directly to the prime brokerage or liquidity provider, and B-book, in which trades are executed internally via a dealing desk. The rationale behind combining elements of the two execution methods has the specific intent of protecting traders from any legal liability with regard to repayment of negative balances incurred by extreme volatility or otherwise. As a result, Synergy FX is now offering hybrid execution accounts.

Synergy FX CEO Christian Dove explained in a corporate statement: “As a result of public demand for Negative Balance Protection, we have created our ‘SynergyHybrid ECN’ account. Historically Synergy has run an agency model, as we have always believed in true, fair and transparent pricing for our clients. As we’ve seen however, this model has led to the potential of the clients going in to negative equity, and this has caused disasters with some of the big boys. We at Synergy have the skill sets to manage the ‘edges’ of our clients exposures, which has enabled us to change the way we think about the service and the pricing we can offer you. We can now offer you the exact pricing that we receive from the market, and we simply charge you a small commission for each transaction made. So that’s spreads from 0 pips.”

Mr Dove continued, “For ‘SynergyHybrid ECN’ accounts any negative balance is automatically forgiven and we’ve made that GUARANTEED in our PDS and legal documentation. No other broker at the point of this writing has done this. I believe this is the future of our business and I’m proud that Synergy FX is a leader. The reason we can do it is that we have an experienced team behind us.”

“So with the combination of raw bank spreads from zero pips and true “Negative Balance Protection” in writing, SynergyHybrid ECN is an account designed for real traders. Safety meets Performance, fully ASIC regulated. It’s all about providing you with the best possible product” concluded Mr. Dove.

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