A few years ago, an ordinary headline in Bloomberg or The Economist would read something along the lines of: “The Forex Market is Shrinking” or “The Glory Days of Forex Are Gone”.
Decades of uncontrolled globalization, excessive mobilization, and a boom in the financial services sector, led to foreign exchange becoming the largest market in the world. Forex veterans can still remember the market’s heyday when brokers thrived in an unregulated environment.
“When I first started working at a brokerage, high-technology adoption was still quite low, automated trading wasn’t as prevalent as it is today, and the words “EU regulations” didn’t generate panic on every mention,” says Mrs. Chen Ben-Nun, Head of Sales and Business Development at Leverate, a leading technology and services provider for Forex brokers.
“But the biggest difference in my opinion was the lack of bad reputation that is associated with the business today.”
The spread of binary options and forex frauds have tarnished an otherwise respectable industry, and caused many different institutions, from banks to PSPs, to label forex as harmful business. “Clearance was never an issue in the old days,” says Mrs. Ben-Nun. Getting your trader’s deposits through has become a hurdle for unregulated brokers, prompting many of them to take the path for regulation.
But at the same time, compliance laws in the EU have evolved, making life much harder for regulated brokers. The forex industry in Europe went through a process of institutionalization in recent years, with the strict implementation of MiFID II and GDPR laws.
With the recent CySEC announcement that warns of 5 Million Euro fines on brokers who fail to conform to their legal requirements, today’s brokers are far more scrutinized on a daily basis.
Meanwhile, trading technology has taken giant strides forward along with the rest of the Fintech sector, making entry into the market much easier, and intensifying the competition. The capital investment needed today from a new broker is far greater than it was a few years ago. All of these factors combined to make the current impression, that forex brokerage is no more the land of unlimited possibilities.
Tools for success
And yet, despite all the impediments and the tightening competition, Forex brokers are still making hefty profits from their businesses. “Success in the forex industry is not as easy as it once was, but it’s still very much doable,” says Mr. Pablo Schvartzman, Head of Customer Success Department at Leverate. Pablo points at a key attribute new brokers need to have in order to gain advantage in today’s market.
“The one thing that brokers are looking for today is an all-encompassing solution provider. Starting and maintaining a brokerage demands taking into account a lot of aspects, much more than in previous years, and a lot of attention should be given to all the details. Our clients have become weary of working with endless 3rd party providers”, says Pablo. “For that reason, we always recommend taking the full suite.”
Leverate’s full suite package offers brokers everything – from servers and trading platforms, through all the accompanying management tools, all the way to liquidity, reporting tool and regulation compliance service. “We will gladly even build your website if it’s too much of a hassle for you,” says Pablo.
For beginners, Leverate offers the fast lane – a white label package that combines all of the above plus instant regulation, by becoming a brand under the umbrella of Leverate Financial Services. A fully committed support team is obviously a standard requirement in these solutions.
“As new hurdles pile up every day, a comprehensive, or “blanket” approach, is definitely a way to get an edge in the market,” sums up Pablo.
Traveling off the beaten path
While fledgling brokers are looking to get a head start in the industry, more seasoned ones are desperately searching for ways to blaze their trail in this crowded market.
“Defensive measures will only take you so far. Brokers should always be actively on the hunt for new technologies and new opportunities”, says Mrs. Chen Ben-Nun. “Staying relevant means anticipating the future and being ready to explore new things.”
In this front, Leverate sets its sights on a number of promising markets. One such opportunity is the ability to receive crypto payments, in addition to crypto/fiat settlements. “Even our regulated clients are facing difficulties with clearance”, says Mrs. Ben-Nun, “and not all brokers have adapted themselves to the future of crypto payments.
Another promising front is lead generation. “We offer a number of innovative ways to bring leads”, says Mrs. Ben-Nun, “whether it’s through dedicated trading education websites that produce hot-and-ready leads straight to the client’s CRM, or a unique trading game app branded by the broker, that allows him to tap into the gaming crowd, and provides him with his own marketing channel.”
Another option that is gaining popularity is partnership. Many different businesses offer various partnership options for anyone with contacts in the industry, whether as IBs, affiliates or white labels. “In Leverate we identified the demand for beneficial cooperation, and that’s why we offer our clients various partnership program that will help them boost their revenues.”
Last but not least is “active” regulation compliance. Following your legal duties and submitting your reports on time is one thing. But important as it is, regulation compliance can be far more than penalty avoidance. “EU and AML compliance are valuable today – both for a broker’s reputation and marketing efforts, and for his internal management. Our Regyoul8solution is more than a reporting tool – it also keeps the broker on top of his daily performance in terms of Best Execution, which allows him to constantly improve his services and increase his client retention and acquisition.”
Despite so many changes in the market, Forex brokerage will continue to be a lucrative business. “Sharp players will keep finding smarter and better ways to earn their share”, says Mrs. Ben-Nun. “In my experience, a tight-knit budget, a wide network, and an uncompromising technological approach, always provide sure-fire results.”
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