Integral Retail FX Survey 2014: The Results

One of the leading financial technology providers in the industry has just released the results from its annual survey of the retail forex market for 2014. The methodology is to pose relevant questions to senior executives of FX related companies across the globe to get a glimpse of their current perspective of the industry.

Forex Magnates provides a detailed summary for our readers, but for those who are willing to check it out for themselves, the infographic of the annual Integral Retail FX Survey can be found here.

Do you see the following as opportunities for retail FX brokers in 2014?

There is a wide division between answers about which is the hottest aspect of the business to bring new opportunities for the companies. This spells good news, as companies will be focusing on different aspects of their offering, hence bringing in more innovation. Intensifying marketing activity, expansion into new products and asset classes and introduction of new technology are the top picks that are sharing the first spot all taking 13% of the answers. The second place is even more interesting as it reveals that 12% of the respondents are betting on increasing their focus on their current geographical markets, consequently 12% are stating that they will look for new geographical markets.

Do you consider the following as challenges for retail FX brokers in 2014?

From the options presented, FX executives highlighted increased competition (15%), rising operational costs (14%), changing regulations (14%) and new customer acquisition (14%). Lack of volatility has not been a worry for many participants as only 10% are fearful that it will disappear from the markets.

Which risk model will forex brokers favor in 2014?

A combination between an agency model (A-book) and market-making (B-book) has been widely favored by 58% of respondents, while only 8% believe that B-booking is enough. About 34% of the respondents are focusing their efforts on a complete agency model.

Do you expect the total volume in the retail FX market in 2014 to be more than last year?

FX executives are widely optimistic about the market driving more volumes to their business in 2014. Only 3% believe that volumes could be lower, while 76% are betting on more trading activity.

Do you think that market volatility is correlated with profitability for FX retail brokers?

Survey respondents are quite unanimous with regards to volatility driving their profitability – 65% of FX executives believe that there is a strong correlation, while 26% mark it as partial. Only 9% state that they are not observing any correlation between market swings and their profits.

Hot or Not for 2014?

There have been several options to choose from and the most popular ones are Algo Trading and Open API platforms. Social trading and market research and trading tools alongside new Graphic User Interfaces and frontends are deemed rather important, while binary options are losing their luster with about 50% of respondents believing that they will continue to be hot in 2014.

Are you planning to implement the following in 2014?

It appears that the biggest percentage of respondents (16%) are looking to source additional Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term, while 14% are after smart aggregation and execution. 12% of all respondents deem new front ends as crucial to their plans, while 10% are planning to introduce an A-book model to their dealing. Automation in Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term and social trading are the other two categories that deserved special attention amongst FX executives.

Are you considering to use an alternative platform to MT4?

Retail FX is gradually shifting away from substantial dependence on MT4-based solutions as 28% state that they are already using an alternative, while 37% are contemplating to use one. A minority of 35% do not state any intention to diversify their platform offerings.

Is it essential for retail FX brokers to use a combination of bank and non-bank liquidity?

The majority of the participants in the survey (77%) are firmly committed that a combination between both is essential, while only 23% are happy with relying on bank liquidity.

How many liquidity providers do you think are required to optimally run a forex brokerage?

About 42% of respondents believe that somewhere between 6 and 10 liquidity providers is the right number, while 31% are happy with somewhere between 2 and 5. No FX executive states that one is sufficient, while 27% state that they essentially need as many as possible.

From which regions of the world are you expecting customer growth from in 2014?

According to survey respondents emerging markets are the key to future growth of the number of retail traders across the globe, while the US and Europe are not seen to provide much growth opportunities. Eyes are on China with 84% expecting more customers from the country.

Will Cyprus continue to be a significant retail FX center?

There is some skepticism amongst participants in light of turbulent developments in 2013 surrounding the island - 62% believe that it is unlikely that it will continue to be a major player in the space.

Will Japanese brokers be able to replicate their success outside of their domestic market in 2014?

Most of the survey participants express their doubt about Japanese forex companies dominating outside of their well-known home market - 62%.

Do you expect to see more M&A in the retail FX market in 2014?

According to the vast majority of FX executives there is a widespread consensus on the already ongoing consolidation within the industry – 97% of respondents believe that we will see more mergers and acquisitions in 2014.