By Richard Perona, Vice President of Sales, Fortex Technologies
Setting up a fully established FX brokerage can be a long, complicated journey. There is a long list of essential requirements for the FX industry:
- MT4 server(s)
- An MT4 Bridge
- Institutional platform for sophisticated clients
- Aggregator for LP feeds
- Back office
- Web trading platform that works and connects to other platforms
- Hosting firm to manage server(s) in a major cross connect hub
- FIX API connections
- Risk management suite
- Staff to ensure that all of it is connected and running smoothly
Brokerages that rely heavily on outsourcing to meet their tech needs often find that they end up working—and managing relationships—with a dozen or more different technology providers to meet their requirements for essential capabilities. And what results is a complex infrastructure that is challenging to integrate, hard to manage, and almost impossible to effectively control. We call that problem “Clutter of Venues”.
There are plenty of technology firms waiting in line to help satisfy the diverse customer expectations. Before a brokerage engages a number of them, it should be aware of the drawbacks of a multi-vendor approach to mission-critical systems:
- Higher staff costs: Sure, “best-of-breed” solutions can be a great thing, IF the brokerage firm’s CIO or IT team is deeply familiar with each solution. They need to know that some solutions offered might not be fully proven, technologically stable, or scalable. The in-house team needs to know how to troubleshoot and provide at least Level 1 support for all of the different systems deployed to minimize inevitable downtime and issues. This often requires adding costly IT resources.
- Higher impact of downtime: Finding the root cause of a problem in a “Clutter of Venues” environment usually takes extended troubleshooting time—which increases the financial impact of downtime. Time spent trying to pinpoint an operational problem is expensive and better spent on more strategic projects.
- Accountability: “Clutter of Venues” environments are notorious for vendor finger-pointing when things go south. Asking multiple vendors to come together to help solve a problem is easy. Finding those who will is another story.
- Higher technology costs: Multiple systems all have their own associated equipment, provisioning, and management costs. In addition, each also has vendor support, maintenance, and licensing costs. Not only does this increase the total solution cost, it also demands a way to accurately track and manage all of the contracts, terms, and renewals for each.
It doesn’t have to be that way.
The simple solution to the No.1 problem a brokerage encounters is to work with an established technology provider who provides an All-in-One Solution. The amount of time, money, and effort spent integrating and maintaining ten different technology venues can be spent instead on activities that generate revenue.
An all-in-one technology solution provider should have the following characteristics:
- Long history of innovation and industry firsts
- Confirmed high trading volumes and tickets
- Trading technology expertise and support
- Several high-profile reference clients
Use the following table as a checklist for identifying key elements of a stable, high-performance all-in-one solution provider:
Dedicated facility at Equinix NY4; LD4; TY3 and/or HK3
|All major banks and LPs are cross-connected in these global hubs|
|Full redundancy, hot backup, and global network footprint||In case of emergency, an offsite backup is required to maintain operations|
|Algorithmic trading engine for scripting your own automated trading strategies||So clients can run their trading strategies|
|Round-trip trade time sub-1ms with 480-Gbps throughput||High speeds reduce slippage and missed opportunities|
|Process thousands of orders concurrently; minimum 500,000+ per day||Avoids trading bottlenecks, and missed opportunities, that can occur if too many trades hit at once|
|Powerful matching engine that represents each trader’s order in interbank market for best availability liquidity||Find hidden liquidity for improved pricing on large ordersGain post-trade bilateral transparency model for trusted counter-partiesCustomize liquidity pools to create a private ECN|
|MT4 Bridge with flexible deployment options||Offer an MT4 service for retail clients|
Cross-connection to LPs through dedicated dark fiber
|Dark fiber connections avoid Internet transport for higher reliability and scalability of point-to-point connections|
|Direct access to Tier 1 liquidity from all major money center banks||Gain instant, low-cost STPTake advantage of razor-thin spreadsGet real-time executable streaming quotes for global currency pairs, metals, energy, and CFD products|
A platform or device with market depth for individual traders and advanced capabilities
|A superior user interface for web browsers and mobile users encourages rapid adoptionGain integrated operations for a consistent user experience, including ticket-based and VWAPCloud-based delivery enables for easy access anywhere and eliminates the need for installing and maintaining software and infrastructure|
|A stable,reliable HTML5-based WebTrader||Enable users to trade 24 hours a day from anywhere with any device (Mac OSX, Linux, Windows, iOS, and Android operating systems)Simplify deployment|
An FX-based back office and CRM system, preferably web-based
|Simplifies trade processing, settlements, account statements, reporting, and regulatory filing|
|FX risk management suite||Improve risk visibility by assessing real-time market exposure by firm, trading domain, individual, asset class, currency pairs, or other criteriaGet built-in risk alerts and triggers to control risk thresholds and set systematic measuresReceive automatic margin calls and margin liquidationsCustomizable features for meeting specific requirements|
Working with an All-in-One technology provider that can cover all the needs may reduce your labor / overhead costs, provide better service and certainly will reduce the infighting in “Clutter of Venues”. If a brokerage or soon to be brokerage has any questions on how to eliminate the No.1 problem facing brokerage today, please feel free to contact Richard Perona at [email protected]