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Screenshot of a breaking news alert e-mail from Q2 2017
For many start-up retail FX brokerages, the initial stages of establishment represent a crossroads whereby the decision to invest in in-house infrastructure, or to opt for a complete turnkey solution are matters for consideration. Indeed, by choosing the latter, start up costs are lowered, but flexibility can be hindered somewhat.
However, in today’s cost-sensitive world, there has been a noticeable increase in the number of new firms offering turnkey brokerage solutions. The latest addition to this sector is FTPrime, which is an enterprise solution provided by Forex Technologies which offers a suite of services that combines technology, liquidity, and prime brokerage, to offer Forex traders both large and small unprecedented access to the inter-bank market. This new product aims to eliminate the current discriminatory situation that exists in the Forex market, in which smaller market participants are unable to access inter-bank grade liquidity due to low capitalization, and are over-charged for liquidity via wide spreads or high transaction fees.
Forex Technologies’ view is that most existing STP liquidity providers do not provide prime brokerage credit services, and most existing prime brokers do not offer execution platforms. Indeed, there are firms such as BMFN which provide a ‘broker in a link’ solution which, according to the firm, can get a brokerage up and running within a matter of minutes, and APIFX which was launched last year in order to combine the consultancy services offered by Archer Consultants with FX brokerage technology so that an entire regulatory environment, operational facility and technology solution can be acquired from the same provider.
FTPrime’s solution aims to offer access to inter-bank liquidity and prices thus far reserved for much larger, highly capitalized entities.
The firm’s official announcement states that FTPrime has created technology that achieves direct cross-connect integration with major liquidity providers, without the high trade costs and high capitalization requirements currently maintained by prime brokers and liquidity providers. Small and mid-size Forex traders, brokers, and CTAs now have a new option for straight-through access to inter-bank liquidity and spreads, complete with a choice of various affiliated retail FX platforms, at a transaction cost of around $6 per USD 1 million traded.
In terms of functionality, FTPrime aggregates prices from major banks such as UBS, Citi, and Deutsche Bank, and adds liquidity from providers such as Currenex, HotSpot, Integral, FastMatch, and others. At the same time, the solution aggregates the trading accounts of smaller market players into large trading accounts open with regulated second and third tier prime brokers such as Advanced Markets, FCStone, FXCM Prime, Forexlitas, etc. Accounts have a secure and fully independent back office and access control provided directly by FTPrime, and may use an array of retail execution platforms, accommodating trading tools and strategies via FIX and Java APIs.
Institutional traders and CTAs can expect vastly improved spreads, easy application of proprietary trading tools through FTPrime’s FIX and Java APIs, and the ability to trade Forex without even a broker-dealer. By depositing directly with one of FTPrime’s partner prime brokers, Forex traders and money managers can use one of the many retail platforms FTPrime offers to trade directly on the inter-bank market.
Additionally, FTPrime considers that broker-dealers can offer their clients better spreads, and can increase volumes by offering clients true direct market access without a B-book. Risk can be better managed by offloading toxic flow to the liquidity provider, and that can approach prospects from a stronger position, offering direct interbank market access through better-known, regulated prime brokers, instead of having to promote Forex brokers to act as middlemen between the trader and the market.
FTPrime’s solution also caters toward third party platform providers, who can their broker-dealer clients an STP solution without the revenue uncertainties of working with conventional liquidity providers. By referring their respective broker-dealer clients to FTPrime, platform vendors can confidently offer them true access to interbank prices and spreads. FTPrime’s aggregated incoming spreads are near zero, and any markups would be shared with the referring platform provider. Vendors can even offer their platforms directly to individual traders, referring them to FTPrime for accounts, expanding their market audience far beyond the customer base of just one broker-dealer.
The company cites social trading communities such as Tradency or myFXbook as further potential beneficiaries, as well as the strategy providers who use them can continue earning revenue on the future trades of community members by referring them to FTPrime, instead of earning revenue solely from renting or selling a strategy.