What Can a Small Broker Do in Tsunami Situations?
- In this guest contribution, our new guest blogger Hüseyin Gürsöz shares with us what, in his experience, a small broker can do in order to save himself from crisis situations like this past Black Thursday.
Hüseyin Gürsöz
ABOUT THE AUTHOR: Hüseyin Gürsöz is the CEO of Meta Technologies. The company has offered and managed FX white label and brokerage solutions since 2010.
Last Friday, the Friday after Black Thursday, the USD/CHF and EUR/CHF showed us the importance of 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 for an FX brokerage firm. Whether your brokerage is a market maker or an STP, you will encounter the problem of clearing your positions in volatile market conditions.
Most brokers use a price aggregator that offers the best bid/ask prices from several liquidity providers. But on Friday, the USD/CHF and EUR/CHF price movements proved that even a full-fledged price aggregator is not enough for proper 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.
Small brokers usually don’t have research departments to analyse market conditions and future volatility predictions, they have to follow the margins on the exchanges where FX pairs and commodities are traded. The EUR/CHF's margins increased four times and the oil margin increased two times before the high market movements.
STP brokers cannot get proper liquidity at unexpected market conditions while market makers quote their prices. In conclusion, you should keep your clients away from trading high margined products even if you are an STP or market-making broker and, instead, add one STP and one market-making broker to your liquidity pool.
This article is part of the Forex Magnates Community project. If you wish to become a guest contributor, please get in touch with our Community Manager and UGC Editor Leah Grantz leahg@forexmagnates.com
Hüseyin Gürsöz
ABOUT THE AUTHOR: Hüseyin Gürsöz is the CEO of Meta Technologies. The company has offered and managed FX white label and brokerage solutions since 2010.
Last Friday, the Friday after Black Thursday, the USD/CHF and EUR/CHF showed us the importance of 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 for an FX brokerage firm. Whether your brokerage is a market maker or an STP, you will encounter the problem of clearing your positions in volatile market conditions.
Most brokers use a price aggregator that offers the best bid/ask prices from several liquidity providers. But on Friday, the USD/CHF and EUR/CHF price movements proved that even a full-fledged price aggregator is not enough for proper 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.
Small brokers usually don’t have research departments to analyse market conditions and future volatility predictions, they have to follow the margins on the exchanges where FX pairs and commodities are traded. The EUR/CHF's margins increased four times and the oil margin increased two times before the high market movements.
STP brokers cannot get proper liquidity at unexpected market conditions while market makers quote their prices. In conclusion, you should keep your clients away from trading high margined products even if you are an STP or market-making broker and, instead, add one STP and one market-making broker to your liquidity pool.
This article is part of the Forex Magnates Community project. If you wish to become a guest contributor, please get in touch with our Community Manager and UGC Editor Leah Grantz leahg@forexmagnates.com