During the past ten months the FX market has constantly been reminded of the declining volumes across both segments, volume has been correlated to volatility and with the global recession not taking any favourable turns we could be seeing another 10 months of misery. In this climate what can be done to save the bottom line, pricing in FX is being squeezed on all instruments and participants need to explore new ways or re-introduce methods that can keep ticking the profit.
Recently a leading listed FX broker reintroduced a dealing desk model, its clear that brokers are reacting to the vulnerable environment.
Forex Magnates sat with Jeff Wilkins, Managing Director of ThinkLiquidity a technology and Risk Management specialist, and discussed opportunities in getting the best out of your flow.
Jeff Wilkins, Managing Director, ThinkLiquidity
Q: What does ThinkLiquidity do?
A: ThinkLiquidity is an international technology firm specializing in the foreign exchange and CFD market. At ThinkLiquidity, we provide professional tools and resources that enable brokers of all sizes to manage risk and increase profitability. We focus on the success of foreign exchange and CFD brokers around the world. We offer a full brokerage set up or our partners can choose to use any of our unique tools from an a la carte menu. We don’t offer a “one size fits all” solution; rather we get to know the unique needs of our customers and are able to customize an appropriate solution.
Q: What makes your ThinkLiquidity unique compared to other brokerage solutions companies?
A: What makes ThinkLiquidity unique is the angle in which we are approaching the market. Our solutions are developed with an intimate focus on risk management. A great example is our outsourced risk management offering. We have a fully staffed 24 hour trading and risk management team of industry veterans that specialize in managing trade flow for brokers. Another example is our ultra-low latency MT4 Liquidity Bridge equipped with best-in-class algorithmic hedging solutions. We also have a web based reporting portal, MAM solutions and some other very unique offerings. The brokerage industry is at a cross roads right now and we want to be sure our brokerage partners are not leaving any revenue on the table.
Q: What should an average broker make from pure a book, b book flow, toxic flow?
A: There are a number of factors that play into the equation. Volatility, liquidity, spread, mix of flow and size of flow all play critical roles in determining how to handle a particular book of business. With our tools, brokers have started to seek out toxic flow because they now have an effective solution to manage any type of trading. Every broker has a unique set of customers and that is where we come in. Our role is to maximize revenue on existing flow so brokers can focus on selling. This industry we are all in has evolved and brokers have a choice – adapt, or become obsolete. We manage all types of flow and manage it very well. We have proven results and a team of highly skilled professionals that focus on brokerage return on volume. In order to get specific numbers, we would have to analyze the brokers existing flow and are happy to do so, but I can tell you we have consistently been able to capture much more than the spread.
Q: What skills do brokers lack that you can fill?
A: ThinkLiquidity’s focus is on risk management and increasing revenue on a broker’s current book of business. This is just one thing a broker needs to focus on among many other items such as sales, marketing, compliance, accounting, IT and Human Resources. To say brokers lack certain skills may not be a fair statement, but they may not have the resources and experience in the areas where we specialize. Because our focus is so directed, we are able to get very granular in what we do. Every broker is unique and because of our expertise and focus, we are able to employ industry leading strategies that have been built by quantitative analysts and risk managers with years of experience in this industry.
Q: Is there a big difference between how brokers and banks handle trade flow?
A: This is one of those areas where the industry has taken a dramatic shift and brokers need to adapt or they will without a doubt be left behind. The lines between how banks operate and brokerages need to operate have become very blurred. Back in the “wild west” days of this industry, there wasn’t much of a need for brokers to employ sophisticated risk management practices because making money was easy. Times sure have changed and the brokers that are thriving are the ones that know how to effectively manage risk, set up unique liquidity pools, monitor execution, and know when and how to adapt and change strategies. This is where we can immediately fill that expertise gap and have an immediate impact on a business.
Q: What would prompt a broker to call you?
A: I’d strongly encourage any new or soon to be broker to contact us regarding our brokerage set up offering. I’d also love to discuss various forms of risk management and trading operations. There is nothing to lose from a call and I can promise that they will at least walk away with some helpful insights on the industry. For an existing broker, I’d ask them to look at how their results have been over the last couple years. If they think there is room for improvement, then please do not hesitate to contact us.
Q: Will you be attending the upcoming Magnates show in London?
A: I wouldn’t miss the show for anything. I think you have done a fantastic job at getting all if the big names in this industry together in one setting. I’m looking forward to seeing some familiar faces as well as meeting new people. I’d encourage anybody interested in our solution to stop and talk to me at the summit.
Volumes are certainly affecting the market behaviour however regulatory changes are also putting pressure on how brokers will operate, in Australia the regulator is lifting the capital requirements, and other jurisdictions will be putting new procures in place. Brokers will be considering firms that can manage the back office and dealing element in order for them to focus on the front office side with sales and marketing and not hold too much cash with regulators.
