Brokers Making Moves to Cut Costs in the Face of Regulatory Shift

Though several years in the making, the compliance measures greatly rewrote the rules and caused wholesale changes.

The retail industry has seen a profound shift in recent years due to sweeping changes in the regulatory space. While initially intended to foster safer trading environments, an unforeseen byproduct has been the rampant cost-cutting measures adopted by retail brokers.

ESMA forever changed the retail FX and contracts-for-difference (CFDs) industry a year ago with its new restrictions on leverage and offerings.

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Though several years in the making, the compliance measures greatly rewrote the rules and caused wholesale changes.

This includes the massive decline in turnover in the retail FX market. Indeed, many brokers have closed up shop entirely while others have been forced into new jurisdictions.

Post-ESMA fallout

This trend has been confirmed and also exacerbated in recent quarters, as corroborated by several filings from brokers themselves.

By most metrics, retail turnover has inverted lower post-ESMA, a worrying trend long-term that places new stresses on retail operations.

Given restrictions on leverage, transactions, and PSPs, many retail investors have opted to choose offshore brokers or those outside the EU entirely.

While this presents its own risks, another consequence is the eroding profitability for EU-based venues.

This has most likely taken shape in the form of broad cost-cutting measures to help trim on operation costs. However, this assessment is not all doom and gloom, but also an opportunity for brokers to adapt to new technology.

This includes the harnessing of cloud-based solutions to reduced fixed costs. The use of artificial intelligence (AI) is also a huge boost for operations as well in a bid to help maintain a competitive edge in the industry.

Many other brokers have also embraced state-of-the-art CRMs and machine learning technology to also help their business.

Furthermore, other venues have targeted their IT departments, culminating in their respective move to other locales.

Cost-cutting has also seen the cessation of activities in some markets, perhaps exacerbating the decline in turnover in certain locales.

Finally, many retail venues have opted to address the uncertainty of the market head on, looking for revenue sharing models and quitting  B-book models.

What X Open Hub can do for you

X Open Hub offers a wide range of trading solutions that collectively enable forex brokerages and banks to achieve more profitable business models. This is accomplished via lower total costs of maintenance and trading.

Presently, the group is providing an advanced cloud-based solution, which is significantly cheaper that MT4 server infrastructures on offer.

Another draw of this service is the offering of spread rebates for new institutional clients. To learn more about new offer please check this link.

With no server-side software or hardware to install, X Open Hub’s solution is easily-integrated and instantly scalable, leveraging its cloud-based infrastructure.

This solution is collocated with all major banks and liquidity providers to deliver sub-millisecond latency.

Of note, the offer from X Open Hub is widely recognized and acknowledged by international institutions, banks, and brokers.

The group presently offers significantly improved spreads and much lower fees for partners working in STP/ECN models as well.

Future plans for development driving innovation

X Open Hub is presently focusing on expanding its business relationships and reseller program. We are also constantly upgrading our servers and in a few weeks is planning to introduce broad offer of synthetic stocks.

Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.

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