4.) Liquidity is often a fundamental crux for brokers, is this process broken or in need of fixing, or is limited liquidity serving as a preventative step to curtail unsustainable operations?
Since the competition in the FX market is constantly growing, brokers are indeed under constant pressure of keeping up their ‘A game’ and providing top quality liquidity to their clients. A combination of the right components in this regards, is a must. Even some of the globally most known liquidity platforms lack the ability of adapting to the unique characteristics of retail trading. A strong liquidity pool has no value if the bridge component that connects the liquidity to the trading platform or front-end is weak, and the other way around. In the current competitive state of the retail FX trading business, effective liquidity management strategies really can make all the difference between success and failure.
Aggregated liquidity solutions, can serve as a sustainable way out, however, in order for brokers to get the most out of their liquidity applications, it is essential to have the right mix of personnel, costs and infrastructure. A technology-focused broker may miss the need for key business-oriented personnel to handle the clients’ needs, and it is also common to see a broker equipped with top-of-the-notch personnel but lacks the right technology know-how to manage the platforms installed.
Bitcoin: An Investment Safe Haven to Dominate 2021Go to article >>
In order to control the market risks, the Soft-FX aggregator distributes trading volume between A and B books, based on present rules. It compensates the B-book trading risk by A-book brokerage commission.
Before the platform sends an order execution confirmation, it will check the actual market price, therefore eliminate the appearance of out-of-market positions in B-book.
The risk is reduced over limits by balancing positions between different external suppliers, based on margin usage. The aggregator creates positions reconciliation between clients and external suppliers in this way, eliminating market risks, as a result of hidden undercover positions. New ways of risk minimization is what we at Soft-FX believe to be a top priority in future development of the industry.