Forex Magnates talked with Travis Dahm, co-founder and managing partner of CurrentDesk about what are the survivability rates of new brokerages, the tough current market and regulatory environment and the ways to optimise a brokerage business in it.
1. How did you get into the FX industry?
Initially I was in asset management, in fact I founded an asset management company. One of our clients was an offshore hedge fund who wanted to start a broker. I proposed them to consult and help them start a brokerage firm for their clients. Through that I met my business partner Ron Singer, who is the other co-founder at CurrentDesk. We consulted together for about a year and a half and put together a brokerage for the fund’s accounts. We have set up the entire process up from liquidity to bridge, to platform, etc.
2. So how was CurrentDesk born after that?
The hedge fund had a managed account program so they did have to onboard clients and accept funds on a continuous basis. We have noticed two things throughout the process. The first thing was lacking in the forex broker world was the lack of real-time reconciliation on trades and position monitoring. Its a critical missing component for an A-book STP type of broker as obviously their margins are a lot less. So if they have a trade that doesn’t make it all the way through to the liquidity provider (LP) it can cost them a significant amount of money. So we set out to create what is now CurrentRisk, which is a real-time reconciliation and A-book position monitoring software.
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The second thing we noticed was the lack of broker management solutions out there for brokers to be able to run their business efficiently outside of multiple solutions, excel spreadsheets, etc. The biggest question that we get from brokers is “can you tell me how much money I made last month?”. Brokerages out there do not know how to do their calculations properly, their platform charges in one way, their LP charges in another way, they have bridge fees, etc. Some people in the medium and smaller sized brokers are just guesstimating how much money are they making.
In the beginning we thought that both problems are solvable with one single product, however as time went on, we realized that the demand for CurrentRisk was heavier than we thought, so we aimed to finish that product first and started working on the second problem by launching CurrentBusiness later.
3. Your products are working with multiple platforms, how long do you think before we see a reshuffling of the platform marketplace?
If you ask the dominating platform providers, their answer is going to be that they are going to continue enjoying the position in which they’re in. If you ask the new guys to the block they’re going to say that their business is growing and they well keep seeing new conversions to their platforms. I think that current reign in the industry will remain intact for quite some years, but every single of our established broker clients has more than one platform, so it is up to the brokers to incentivize their clients to move over to additional platforms, rather than clients making that change. Customers are less likely to make that change unless there is a practical reason to do so.
4. We are seeing some consolidation in our industry as trading volumes are declining in recent months, how do you see this unfolding?
The consolidation across the industry can only be partly attributed to volumes, a lot of it is happening due to regulation in some specific countries. In my view, depending on what happens in the regulatory environments throughout the world, we could see more consolidation. Despite that, we are seeing new brokers staring up every single week. In addition we are seeing a lot of resellers, or broker consultants, who are helping people start their own brokerage.