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Building and developing an FX brokerage with White Label services 146 | april 2013

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By Heather McLean

Heather McLean investigates what core services need to be delivered by White Label programs to assist firms to quickly establish a successful online FX brokerage business.

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hoosing a foreign exchange trading white label service is no easy task. The ability to quickly establish a successful online FX brokerage business requires knowledge of which key features, price aggregation, liquidity services, risk and order execution functionality brokers should look for in a scalable integrated technology solution. On the other side of the coin, white label providers themselves need to know what core services they should deliver and how flexible they really need to be to attract, help and retain customers. It is no easy task. Starting at the beginning, to look at what factors should influence a broker’s choice of FX white label service, including hosted e-trading solutions, Luis Sanchez, head of institutional sales for Europe and America at Dukascopy Bank, states that nowadays, brokers have greater opportunities to white label the forex side of their business than ever before. However, he adds the factors that influence the choice of broker for a FX solution remain fundamental and simple. “As a broker should keep focus on their business model, the solution must adapt to their needs, not the other way around,” explains Sanchez. “The cost is the principal element; profitability and margin are key factors. Technology that allows flexibility is a must, and brokers should make sure that their platform does not need replacing after a few months because of a lack of or poor support. And lastly, april 2013

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Liang says institutionally focused brokers tend to have fewer clients that trade more frequently, which could include high frequency traders and model traders. The platform therefore may not need to handle large user numbers, perhaps a few thousand per broker, but it would be expected to handle large trading volumes from those clients, a feature Currenex refers to as vertical scaling.

Luis Sanchez

“The cost is the principal element; profitability and margin are key factors. Technology that allows flexibility is a must...” risk to the reputation of the counterparty must be considered as an important factor.”

Retail focused brokers, on the other hand, have many more clients, some in the hundreds of thousands per broker, observes Liang. He says these users do not log on each day and most will only trade a handful of times per day but stay logged in to monitor the market and their positions. In this case, while absolute order processing time might not be as important as the institutional case, the white label platform must scale to handle potentially huge numbers of simultaneous logins, requiring real time margining of all user positions. Liang says this is a very different technical challenge compared to the institutional scenario. Currenex calls this horizontal scaling. Liang continues: “Beyond these two performance factors, there are still many others to consider. A broker’s current and expected client size would greatly affect service provider selection. A broker’s capital structure and jurisdiction, which would greatly affect

Olivier Virzi, COO of Olfa Trade, picks up on the point that flexibility is an important feature for any modern financial software: “This includes flexibility in the management of liquidity providers and in the liquidity they provide, flexibility in platform installation and interface, flexibility in the types of API connections the platform can assume, and flexibility in the kinds of inhouse programmes the system can integrate with. Other important factors are the speed, stability, efficiency and of course the capabilities of the platform,” he notes. Selecting a service

There are multitudes of factors influencing a broker’s decision in selecting a white labelled FX service, comments Hu Liang, senior managing director and head of e-Exchange Asia-Pacific at State Street Global Markets. The starting point is to look at the client segment of the broker. If the broker is institutionally focused and trading on credit, then the service requirements and performance characteristics would be quite different from those brokers focusing on retail clients, which in turn would require a real time margining service instead of a credit module, Liang notes, adding that the scaling requirements and performance characteristics of these two segments are quite different. 148 | april 2013

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Hu Liang

“The white label system must provide the right combination of features, flexibility and protection that allow the broker to implement the desired trading strategy for success.”


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regulatory considerations, and could require the broker to support various margining methodologies and trading modes, such as hedge-mode versus net mode.” “Another major factor would be the broker’s risk level and appetite,” he continues. “In today’s spread competitive market, excessive risk taking (aka b-book) can consume precious capital and cause high earnings volatility. But a full riskless agency model (aka a-book) might not give the broker enough flexibility to manage risk and optimise profitability. The white label system must provide the right combination of features, flexibility and protection that allow the broker to implement the desired trading strategy for success.” On other factors that should influence a broker’s choice of FX white label service, Jermaine C. Harmon, chief executive officer at Alpari US, says the most obvious one is technology. “This includes proper evaluation of trading platform connectivity and execution,” he states. “Another important factor is support. It is essential that brokers are able to set up a white label service swiftly and efficiently, and have technical support at their fingertips throughout the entire process.” Branding and marketing concerns

It is also important to consider the business model of the supplier, claims Kevin Ashby, deputy chairman at FX Architects (FXA). He believes the question to ask is ‘Is the broker comfortable partnering with an organisation that delivers both liquidity and the platform (normally a licensed financial institution,) or do they prefer to work with an independent software vendor?’ Ashby states that 150 | april 2013

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in practice, many organisations are attracted by the offer of packaged liquidity and technology, which involves limited initial investment and low risk, but involves their vendor having a commercial interest in the provision of their liquidity. Yet he warns: “As the broker’s business expands, so will their desire to differentiate their trading platform and gain more control over the sourcing of liquidity, hedging and the routing of trades.” Another question Ashby says should be asked concerns how the broker approaches brand development, and the creation and retention of customers. “In the institutional market, there are a number of electronic communications networks (ECN’s) that offer white label programmes, such as Currenex and 360T, which have both global presence and high brand recognition. The same is also true in the retail market, looking at Saxo Bank and FXCM. In partnering with a recognised brand, the broker needs to consider how they are going to present the offering, when many of their clients will know the identity of the underlying party?” “However, if the broker chooses to work with a pure technology vendor, while they can brand an existing proposition and develop a tailored, even unique, proposition, this will require a much larger investment,” notes Ashby. “In the retail market, it is even more complex. Technology vendor MetaQuotes has built such a commanding brand and market presence that most brokers either choose MetaTrader as their primary platform, or offer it as an option. The retail market has now developed to the extent


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processing times and errors, and allowing brokers to get closer to their clients,” concludes Russell. Core services for success

Ashby comments that in the retail markets it is not uncommon for brokers to outsource both technology and business activities to a white label provider. He says there are examples of brokers and bank’s allowing a white label provider to provide the vast majority of the resources required to build their retail FX business, with the broker just providing their brand and marketing resources to the venture.

Jermaine Harmon

“It is essential that brokers are able to set up a white label service swiftly and efficiently, and have technical support at their fingertips throughout the entire process.” that there are a number of licensed brokers offering white label packages (liquidity and platform,) based exclusively around MetaTrader.” Client acquisition and retention has to be at the forefront of any decision process involving a white label solution, states Brandon Russell, president, sales and operation (Americas) at Fair Trading Technology (FTT). He says the solution needs to provide the broker with the ability to increase volume and improve responsiveness, while analysing customer behaviour and trends. “With the regulatory environment being what it is, the white label client requirements for an integrated back office and risk management solutions are elevated,” Russell explains. “Providing these also assists the broker in better managing the relationship. The more automated these processes are, the more time brokers will have to focus on client relationships and sales. The scope of the market segment should also be taken into account. What type of client are brokers looking to attract? Introducing brokers, money managers, institutional clients and retail traders all have varying needs that should be taken into account when providing a white label service.” “Ultimately, a white label solution should attract and retain clients while improving efficiency, reducing 152 | april 2013

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“However, the common practice is for the white label provider to just provide the trading platform, with the broker providing their own customer relationship management (CRM), compliance and marketing systems and resourcing all of the business and support activities,” says Ashby. “Yet white label providers are also seeking to expand their added value and create greater client loyalty (or lock-in,) and more recently FXA has been engaged to advise these firms on ways to differentiate their offerings, including the provision of training and support, and extending the applications they provide to cover a wider range of functions,” adds Ashby. With respect to the core services required for a successful white label solution, Sanchez says new brokers must look for a single solution rather than separate components. He explains this thought: “The need to have an integrated, readymade solution is crucial these days. All business aspects should be considered from the front, middle, and back office operations. The platforms, the bank accounts, as well as clients, introducing agents, and money managers’ functionalities should also be taken into account. Direct training, 24 hour support to the partner, 24 hour support to their clients, and combined marketing, help brokers quickly achieve success.” Meanwhile, Virzi states: “First of all, it’s necessary to make a distinction between IT services and business services. There is no doubt that the technical side requires a solid and responsive support team. On the business side, it would be smart for a broker to work with a white label programme that has experience in FX compliance, regulation and marketing. I’m thinking about cross-border issues, evolving regulations in different geo-markets and applying the latest tried and tested digital marketing techniques.” Functionality and features

When looking at what features should influence an institution’s or broker’s choice of FX white label


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trading platform which addresses another growing market demand that brokers and white labels increasingly need to satisfy.” While Russell states that brokers should be seeking solutions that are commensurate with the market demands today, as well as having the ability to be adaptable to the changes that will inevitably present themselves tomorrow. “FTT believes this is more than just a bridge solution and so we have created a hub with shared wallet accounts, social trading, traded flow intelligence, one-to-one account mapping, trade risk management and more to meet the demands of the trading community,” he remarks.

solution, particularly now, given the challenging market conditions and an industry under increasing regulatory scrutiny, Jan Bak, head of institutional business at Saxo Bank, comments: “In challenging market conditions you are looking for a strong market partner that you can rely on in any situation. Saxo Bank is a licensed bank – a regulated entity and an institution that undergoes inspections on a regular basis. This should not be underestimated when a financial institution is choosing a white label solution provider.” “The competitiveness of our white label solution was again confirmed in 2012 when a number of large institutional clients across Asia-Pacific, Western Europe, Switzerland, South Africa and the Middle East chose Saxo Bank as their white label provider,” adds Bak. “We witness an increasing interest in our white label offering from tier 1 and 2 banks – typically leaders in their regional markets and we are proud of this development. Providing our solution to the larger financial institutions implies extensive customization, but it also results in long-term cooperation that both parties profit from. Another trend we see is that our white labels use the branded platforms to facilitate online trading for institutional clients such as Financial Advisers, Family Offices, smaller Hedge Funds, etc. This is a growing part of our revenues and an area that we are investing further in.” Commenting on the wide range of functions that white label programmes need to provide to assist firms to quickly establish a successful online FX brokerage business, Russell says: “The need to meet the demands of the trading community, which is increasingly more educated on industry trends, is certainly paramount as can be seen by demand for various trading platforms. FTT has recognised this and offers a shared wallet application allowing multiple platforms to be seamless synced through the bridge. This includes the mobile 154 | april 2013

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Bak also notes that banks and brokers need to look for state of the art trading platforms, multi-asset product offerings, extensive customer support tools, efficient risk and reporting infrastructure in order to get to market at low cost and grow their online trading businesses. He remarks: “A key feature that we provide is all round client reporting; we’re not just offering a trading platform, but all the support across the entire value chain. This is something that I see as a major competitive advantage for us. A solid reporting tool enables the bank to run a reliable, scalable, efficient business. At the same time it satisfies the increasing regulatory scrutiny that is put in place across the industry. It is essential for us to provide this

Olivier Virzi

“On the business side, it would be smart for a broker to work with a white label programme that has experience in FX compliance, regulation and marketing.”


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advisors. This is an exciting new avenue for the white label business and will put increasing emphasis on being able to offer a true multi-asset offering.” Integrated technology solutions

Sanchez remarks that technology providers should be able to integrate third party solutions for brokers. “This tailormade development should interconnect with other existing features. The technology provider should give additional trading tools to satisfy the needs of the white label. Mobile trading such as Apple iOS and Android are necessary, but the most important thing is that they can be found under the white label partner’s name. Dukascopy Bank brands all trading applications and has a dedicated inhouse team of developers for this.”

Kevin Ashby

“As the broker’s business expands, so will their desire to differentiate their trading platform and gain more control over the sourcing of liquidity, hedging and the routing of trades.” transparency and enable a smoothly operating business inside the white label framework”. “In this space, the service level you put in for clients is highly important”, says Bak: “We are proud to offer our extensive back office and support tools for reporting and risk management. It’s all part of what we offer to our clients together with SaxoTrader for desktop, web, smartphone and tablet platforms. Our white labels acquire client configuration manager toolsets and other tools to help them manage their own clients, support in marketing and business development. This is highly important for reliability, scalability and geographical reach.” Continuing, Bak adds: “Larger financial institutions look to replace legacy systems and create efficiencies in their business model. Saxo Bank’s multi-product offering appeals to these institutions, as they can offer a wide range of products. We offer a true multi-asset platform including FX (spot forwards, vanilla and binary options), CFDs (single stock, index-tracking and commodities), stocks, futures, ETFs and contract options. Additionally we ensure system controls are in place, leaving full control of data and transparency with the white label client.With these factors in place, we expect to see continued white label business growth. Particularly now that private banks also see it as an opportunity for their wealth managers and financial 156 | april 2013

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Joe Conlan, FCStone LLC’s global head of FX sales, adds that in his opinion, liquidity is the most important of the features and functionality required for a scalable integrated technology solution, because brokers need to show their clients the best rates. “Also important is integration flexibilities using APIs and MT4 bridges, which allows for scalability. Beyond this, risk management is an obvious need to protect the brokerage firms from their clients. “Price aggregation is a key feature of our offering, which allows clients to achieve competitive market spreads that they can provide to their clients,” adds Conlan. “We work with clients trading both large blocks and small lots and can customise a liquidity solution for each client. All risk management is done over a highly available web-based portal so that clients know what their position is at all times.” On integrated technology solutions in the white label arena, Harmon agrees that brokers are seeking scalable solutions for price aggregation and matching engine technology that seamlessly connect their clients to their liquidity providers. He adds that understanding the clients’ interaction with Alpari’s matching engine algorithm will allow them to optimise their trading experience and increase the success and longevity of their trading models. Additionally, Russell says regulatory concerns need to be addressed by platforms: “Services meeting the regulatory reporting requirements in the jurisdiction of the white label are a serious consideration as the regulatory environment continues to tighten,” comments Russell. “Risk management software certainly is able to assist in this too, while giving greater scope to traders’ demands. Being able to manage the marketing and sales cycle effectively using customer relationship management


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software is certainly overlooked and something that FTT has found to be of increasing value to brokers, white labels and introducing brokers as they continue to grow their client book.” Harmon comments: “We believe that all white label programmes should embrace speed to market as a core service offering and continually improve this efficiency as technology advances. At Alpari, we constantly strive to improve the speed to market and ensure that QuantumFX is able to set up and onboard clients swiftly and efficiently.” Common requirements

Features, price aggregation, liquidity services, risk and order execution functionality from the perspective of brokers whether they are institutional-based or retail oriented, lead to a requirement for certain core functions that are common to both segments, says Liang. “By definition, a broker takes prices from a group of liquidity providers (aggregation), combines and synthesises a new feed (market making), then provides users access to those prices (stream distribution). Upon seeing the prices, users will act on these prices (execution), requiring the broker to manage the orders and layoff or internalise the risk as appropriate (risk management). Any white label solution, in the core, must support these basic features. “To provide a robust service, there are other features required to round out the core. These include integration services to tie the white labelled platform into the broker’s front and back office systems,” notes Liang, who continues: “While the above should be sufficient for an institutional platform, a retailoriented system would require additional features and service. In particular a robust and real time margining system is a must. The volatility of the FX market can instantly cripple a broker if client accounts are not constantly monitored. When margin calls are triggered 158 | april 2013

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the white label system must be able to execute auto-liquidation procedures based on the broker’s requirements instantly and accurately.” “For retail brokers an extensive offering of reports and compliance tools must also be provided. Different jurisdictions around the world have peculiar regulatory requirements when it comes to reporting and account management. This is especially important for large retail brokers that have operations in multiple countries in the world. For efficient operation, they should select a white label provider that can satisfy regulatory requirements from across the globe,” says Liang. Liang adds that in Singapore, for example, financial institutions offering retail FX services are not only required to have hardware token two-factor authentication, but also hardware-based encryption to protect user’s passwords. Plus, the data centre that offers the service has to be independently certified to handle physical bomb attacks. While Ashby comments that in both the retail and institutional markets, the mechanisms used to source, manage and aggregate liquidity are key to the profitability of the business. He says that historically, white label providers either provided a ‘locked package’, giving the broker very limited ability to tailor or manage the mechanisms used to aggregate and derive pricing or control the subsequent hedging and routing of orders, or a set of very basic tools. He adds: “Customer demand has led to this being better addressed, mainly by the technology vendors. This particular topic is creating opportunities for change in the market, but along with it an increase in the level of systems complexity. Moving from a model where a broker outsources the management of the supply chain to third party, to a scenario that involves insourcing or gaining control over specific


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components is a complex migration. Another key feature is latency. While this is a major aspect of FX trading in the interbank market, only the more developed brokers realise its importance. As with the development of other markets, low latency will become a prerequisite in all facets of the FX market.” Value added reach and scale

Commenting on the ways white label providers can help brokerages to grow their market share and take advantage of new regional business growth opportunities, Harmon says,: “The largest asset the white label providers can offer to brokerages to grow their market share is intelligence. Without breaching confidentiality, they should be poised to share disciplines and best practices from other partnerships and markets to ensure all of their clients can discover and capitalise on new growth opportunities.” Liang states: “If the white label provider has a truly global footprint, this is perhaps the biggest area it can help the broker, aside from providing the trading system. The potential opportunity extends beyond just regional growth. Today, more than ever, brokers are looking to expand internationally. US and European brokers are looking to enter Asia as it is the fastest growing region, and Asian brokers are looking to expand elsewhere to further develop their business. A white label’s regional and global experience can provide valuable insight to a broker’s expansion strategy.” “Additionally, facing Singapore’s strict security requirements, a European broker looking to get into Singapore can not only learn about the requirement from the white label, but the broker can instantly have access to the features as well,” continues Liang. “The cumulative experience and features of a well-rounded white label provider can be the catalyst that helps the broker expand both regionally and globally.” Russell agrees: “White labels give brokers the ability to penetrate markets they would have no or limited access to due in large part to language and cultural barriers. Traditional ‘home’ markets are reaching saturation points and with innovative partnerships, brokers can reach beyond their traditional markets and garner access to markets they would not have had access to.” While Conlan comments that growth can be by market segment as well as geography: “We offer white label technology that can be marketed to different market segments. This helps brokers who are focused on retail clients to expand their offering to capture business from institutional clients as well as 160 | april 2013

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downstream brokers, thus growing their share of the market. White label technology allows retail brokers to focus on their core competency, which is sales and marketing, while outsourcing what is becoming a more commoditised technology.” However, when it comes to growing the brokers business, the motivation of the white label provider and the broker can be in conflict, warns Ashby. He says that by definition, a white label provider wants to develop solutions that have wide appeal while the broker wants something unique. “The technology vendors tend to be much more obliging with respect to supporting a brokers desire to differentiate, but at a price and usually with limited exclusivity,” notes Ashby. “Inevitably there is a balance between developing the workflows and pricing models and products required for region or segment, and the scale of the commercial opportunity.” “With many commercial models based on the volumes traded, it is difficult for a single broker to incentivise a white label provider to develop new functionality, without committing to funding or minimum volumes. White label companies can of course help a broker develop a new market and assist with resources and budget, but inevitably, they need to consider the impact on the rest of their clients and the precedent any such action sets. Inevitably, the smaller and newer entrants to the sector are the most accommodating,” states Ashby. Continuing, Ashby notes that there are a wide range of tools that can plug into or be used to extend the value of the white label provider proposition. He says in the retail market, the growth of the MetaTrader franchise has created a market and a number of vendors have developed tools that either plug gaps in the MetaTrader solution, or extend the standard proposition. For example, FXA has been engaged to design a comprehensive risk management solution to manage large trading communities and a complex systems infrastructure covering multiple white label clients and numerous platforms. “We have also worked with brokers to identify ways to extend the user experience; for example plugging in additional trading facilities or extending the application to cover additional asset classes such as binary options. We have seen a growth in the demand for applications that improve the overall management of the broker’s marketing and sales activities, for example integrating comprehensive systems covering functionality such as CRM, campaign management, affiliate programmes and trading behavioural analysis,” Ashby says.


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However, Harmon says that timeframes typically involved in launching a white label programme and FX trading business can be far longer: “Getting a full circle white label programme set up and running will likely take a minimum of four months. The largest contributor to this timeframe is the execution of multiple legal agreements with clearing parties, liquidity providers and clients.” Yet in the real world, says Currenex’s Liang, the timeframes typically involved vary greatly according to two factors: the first is the white label’s system design and flexibility; the second is the scale of deployment required by the broker.

Brandon Russell

“Services meeting the regulatory reporting requirements in the jurisdiction of the white label are a serious consideration as the regulatory environment continues to tighten,” While Harmon states: “There is a still general lack of business support tools and marketing services available to assist brokers today. For QuantumFX we are developing standardised legal templates that move along the set up, integration and on-boarding processes. This should be an instrumental, value added component of any white label partnership, but is seldom seen.”

The white label’s system design is a huge factor, explains Liang. “Currenex’s system was designed from inception to support white labels. Therefore we can customise just about all aspects of the trading platform without any additional development. Currenex can customize user interface colour, layout, features and language with a few clicks of buttons. Using Currenexprovided tools, brokers can configure multiple margin levels and thresholds for different clients without involving Currenex personnel. And risk management features can all be adjusted and managed by the brokers once they learn the system. This flexibility

Time to market issues

When looking at timeframes to market, Russell says this is all dependent on the complexity of the installation, noting that a straight forward liquidity/ bridge to front end platform such as MT4 takes as little as two weeks, assuming the white label is properly structured and meets both compliance and regulatory requirements. Russell adds: “FTT offers bundled products based on the demands of the white label. Depending on the complexity and requirement for integration of new liquidity, this process could take up to eight weeks leaving the white label with a very robust solution. Ordering bespoke services as and when you need them is also available giving white labels the opportunity to get off the ground quickly with the option of growing into additional services as and when they are required.”

Joe Conlan

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greatly reduces the time required to customize the system via code and development process.” As for scale, Liang says that in general, institutional implementations take less time to roll out than retail brokers, mainly due to institutional clients’ tendency to have larger numbers of IT staff. He says in Currenex’s case, including the actual process of working out white label design and implementing the system, an institutional deployment can be complete in a matter of weeks. For retail broker deployment, where integration is required for automated test account creation, set up and testing for margin and risk management systems, the process can take longer, remarks Liang. In a set up where migration of client accounts is not necessary, a deployment can still be completed in just two to three weeks, but in complicated cases where tens of thousands of user accounts are being migrated, the time depends on preparation, he states. However, he adds that Currenex account management teams will work extensively with the broker to keep the deployment time to a minimum. To increase speed to market, reliable support and a sense of urgency from the white label provider is absolutely essential, says Virzi. Furthermore, he notes that an experienced team will always be a vital ingredient in getting the system to market as efficiently and flawlessly as possible. The time to market equation is also question of the complexity of the installation by the white label client, explains Russell. “A simple connection to a single integrated trading platform and liquidity is essentially a plug and play scenario and can be set up in a matter of a few

weeks. More robust solutions may require additional time due to development time. Most white labels will have a good idea of their client base and anticipated volume. Marketing and sales services do exist for white labels that need additional assistance in that area but we have found that most start up white labels tend to have a conservative eye on the bottom line,” he says. Currenex’s focus for value added business support tools and marketing services that help brokers get to market faster, is about providing a robust and scalable trading platform for clients. Liang says: “As such, we provide tools to enhance the broker’s decisionmaking ability in tuning the system, and focus less on marketing related areas. We tend to shy away from marketing related services, as we believe marketing is a defining characteristic of the broker itself.” “One major business support tool we provide is analytics and statistics,” continues Liang. “A successful brokerage must be constantly tuning its system. It must ensure the prices are properly spread, rejects are kept low and slippage kept to a minimum. The only way to know this is to have data. Currenex provides a set of unbiased general market and broker specific data that helps the broker to tune its trading system. We also help to facilitate communication between the broker and liquidity providers where necessary and requested.” Client targeting

For brokers looking to target specific buy-side clients, Liang comments that solutions providers can reduce time to market for brokers and allow the broker to focus on running the business and marketing the product to the end user. This is especially true for client sectors such as power traders, mobile traders and social investors, because they are so new and changes are happening so rapidly. “These new emerging sectors require huge technical investments,” adds Liang. “Power traders require platforms that can handle large trade volumes and execute in microseconds. Mobile and social system are new trends that are evolving rapidly and therefore require constant change based on frequent user feedback. Both are strengths of white label providers such as Currenex. We have the technical capability that dates back to the birth of electronic FX, and we have the scale to cost effectively invest in technology to keep us with trends.” White label providers can help in this situation in several ways. From a technology perspective, a broker supporting power traders needs three things, remarks Ashby: low latency solutions (to limit slippage and

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FXA has analysed a number of brokers and has seen that the organisation and infrastructure of the traditional FX retail market broker operates at a high costs per client. The analysis shows that their business model is driven by client acquisition and assumes a relatively high level of income per client. The social investing model assumes low monthly client revenues and is, by necessity, built on the principle of high levels of automation and a low cost of acquisition, built around the principles of social media, eschewing many of the traditional acquisition mechanisms.

Jan Bak

“In challenging market conditions you are looking for a strong market partner that you can rely on in any situation.” protect them against toxic flow); excellent order management (including automated hedging and risk management); plus a comprehensive API capability, including a highly automated environment for onboarding API clients. Ashby continues: “All white label providers operating in the retail space also need to offer mobile applications, a low footprint (browser being preferred,) and an API that allows third party solutions to be used by their clients. The mobile application is less important in the institutional space, but a low footprint is becoming a prerequisite in some markets, which disadvantages any platform that require software to be installed on the clients system.” “With respect to social investors, this is a relatively new market with a few prominent pioneers,” says Ashby. “However, there are already a number of applications available that support social trading ‘watch me, follow me’, which can be plugged into existing platforms, and there are social trading communities that brokers and their clients can join. Yet there are two aspects to social trading that brokers need to take on board before directly entering into the market. Firstly, the current costs associated with gaining and keeping a client, plus on-boarding and support costs. Secondly, the average monthly and life time value of the client.” 164 | april 2013

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Ashby points to the mobile sector which is providing another business model for the changing forex market: “It’s an interesting parallel, but the traditional banks built their payments systems around a high average amount and hundreds of transactions per client per year. The mobile phone companies built their systems around pence and hundreds of transactions a day. Mobile phone companies are already becoming the defacto mechanism for making micro and person-toperson payments in some developing markets.” Final thoughts

The conversation between brokers and technology providers needs to be a constant one, observes Russell. He explains: “The landscape is constantly changing as new technology, regulatory demands and end used education continue to evolve. One of the most dramatic shifts has been the access that the trading community has to each other and information. Armed with information, they can make intelligent, informed decisions and get validation from a social trading community.” “White labels are typically limited in their ability to drive innovation but hold key relationships that brokers, and technology providers, typically wouldn’t be able to access without them. They thus become a distribution channel based on their specific client list and the demands of that list. If they are focusing on money managers, then the need for a percentage allocation management module (PAMM) becomes a delivery requirement, whether the white label is facing the broker, or the technology provider,” states Russell. “In turn, as brokers build more relationships with white labels, the need for services that meet that demand, whether it be PAMM’s, mobile, social trading, CRM or multi-platform access, will be called for by the broker and partnerships with technology providers will remain a priority,” Russell concludes.


e-FX Building and developing an FX brokerage with White Label Services