The FX Landscape has changed dramatically this year, mostly due to the implementation of MiFID 2 regulations, and rulings by ESMA, in Europe alongside additional government scrutiny of the Chinese FX Market and the exposure of failed profit-sharing models. As a result, we are seeing quite a few licensed FX Brokers for sale, as well as acquisitions within the industry. Therefore, I want to provide you with a comprehensive comparison of regulatory jurisdictions in order to bring you up to speed with the latest trends.
Our marketing team gets countless emails from retail traders requesting demo versions of our FIX API.
Advanced Markets does not work directly with retail traders (the firm only deals with institutional clients), however, upon researching these requests further I came to the realization that this particular topic is not covered very well online.
Let’s say we have a retail trader, interested in trading via a FIX API, and who is looking for the broker that will be able to provide one.
Throughout my 18 years in the FX industry, AML (Anti-Money Laundering) / KYC (Know Your Client) training has been an annual requirement at the bank and broker level. Regulators have continually stressed the importance of AML / KYC training to help create an effective awareness of, and procedure for, financial crimes with the goal of protecting the firm and their clients. It is important to familiarize bank and financial institutions employees each year with anti-money laundering (AML) policies and procedures.
In a world of constantly evolving regulations, licensing and compliance is of paramount importance. Many traders and brokers read and hear about regulation everywhere, but even with all of this awareness, I still often times come across corporate clients and institutional traders who are failing to conduct counterparty due diligence.
The FX world has witnessed a lot of changes during last five years and there will be, undoubtedly, more to come. Mifid II is pushing for transparency, disclosure and fair trading conditions.
As with most businesses, the operation of a Retail FX Brokerage involves a lot of moving parts that must be synced together to create an efficient and viable business.
These would include Legal (KYC, trading agreements, dispute management, regulatory reporting), Trading Platform Administration and Management, Liquidity and Risk Management Provisions, IB Management, Client Support, and, of course, Sales and Marketing.
Startup FX Brokerages, or “SYOBs”, face many different challenges.
For example, please take a moment to read some of our previous articles on picking the best MAM systems for MT4/MT5 or MT4/MT5 Bridge Provider Comparison.
This time, however, I will focus on the comparison between Traders’ Room and other CRM providers and highlight the key features favored by FX Brokers.
I thought it would be useful to compile a short list of the main differences found when trading OTC (over-the-counter) FX with an STP (Straight Through Processing / No Dealing Desk) “Prime of Prime” and a Retail brokerage.
The differences can be categorized as follows:
- Vetting / Onboarding
- Netting vs Hedging
The global push for greater transparency in financial markets continues to gain traction with top tier regulators now requiring that all entities, engaged in trading financial markets, report their LEI (Legal Entity Identifier) number to regulatory repositories.
In the European Union, this process started as of January 3rd, 2018 as per MIFID 2. In Australia, in accordance with ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844, relief from the requirement to report the entity Identifiers ends on September 30, 2018, which means that starting from September 30, 2018, entities regulated in Australia will need to report LEI numbers for their corporate clients.
I’m sure there aren’t many industry peers who have managed to escape the MIFID 2 avalanche this past year and, perhaps only the frenzy surrounding crypto currencies, ICO and Bitcoin comes close to the boiling hot MIFID 2 topic in 2017.
As January 3, 2018 approaches, FX industry participants are busy reading through the new financial laws of “Markets in Financial Instruments Directive” (MiFID 2) in an attempt to understand how these will affect them going forward. Originally, MiFID was created following the 2008 financial crisis in an effort to standardize the regulatory disclosures for particular markets. MiFID 2 came along with a revised set of standards which will enforce transparency, enhance investor protection and expand reporting to regulators, effectively changing the way that Europe’s secondary markets function. The significance of these changes should not be underestimated as the regulatory expectations of higher quality data sets will most likely lead to more regulatory issues and fines. In a continuation of Advanced Markets’ ongoing, fact-finding series about MiFID 2, (High Impact Changes), I will be exploring the impact of the pending regulations, specifically on how they relate to those engaged in Algorithmic Trading - High Frequency Trading (HFT).
From social media strategy to content creation, what are the steps to take to reach the 1.4 billion-people Chinese market?
Topics: Forex Marketing
Ron Finberg, Head of Business Development at Cappitech.
MAM is an acronym for Multi Account Manager, a plugin originally designed for the Meta Trader 4 Platform to allow the proportional (or any set) profit and loss distribution from Fund Manager (or Master) to Investors (or Sub Accounts).
Best execution policy under MiFID adopts a multi-faceted approach that addresses, amongst other things, quality of execution, trading conditions extended to clients and the counterparty selection process. It also provides directions and guidelines on how best execution can be achieved.
The execution policy, set forth in MiFID II rests on several main pillars and I will briefly describe my findings on these below.
With the deadline for MiFID II implementation fast approaching, a lot of confusion and uncertainty still exists within the FX Industry. MiFID II regulation is divided into several distinct rule sets with the legislation applying to a broad range of financial industry players, those who provide investment services, such as investment banks, portfolio managers and brokers, and intermediaries such as inter-dealer brokers and market-makers. The main objective of MiFID II is to ensure the fair, effective and safe operation of financial markets. Failure to comply with the directive could result in significant fines.
The MetaTrader 4 Bridge is one of the most popular add-ons for MT4 Servers. It was created in early 2000 and, ever since then, there have been many rumors as to who actually developed the first commercial version (of course, many industry veterans know the name).
Welcome to a financial world, full of mysterious acronyms. LEI, CASS, ECP, EMIR, MiFIR, MTF, OTF… This industry just loves acronyms and MiFID II just gave us a whole lot of new ones to work with.
One that I have started hearing more often is the LEI number and it relates directly to the requirements embedded in the upcoming MiFID II directive. The following article will hopefully give answers to these much-asked questions, what is an LEI? Who needs one? Why it is required? How do I get one?
MiFID II, the “Markets in Financial Instruments Directive”, is legislation that is set to be implemented across the European Union on January 3rd, 2018. As this due date approaches, many market participants are scrambling to implement changes to hopefully comply with the new rules. Some, on the other hand, prefer to procrastinate as long as possible in the hope of getting further clarity on this pending regulation.
While some industry sources are arguing whether or not MiFID II will dramatically affect the FX industry, most FSA and CySEC licensed FX brokers are rapidly adjusting policies in order to comply with the new requirements.
Natallia Hunik, Global Head of Sales at Advanced Markets and Fortex, Inc. and Andrew Saks-McLeod of FinanceFeeds sat down during the iFXEXPO 2017 in Limassol to discuss the state of FX industry in Cyprus and what future will bring.
FX is the most liquid market in the world with over 5 trillion USD in daily turnover, and 1.6 trillion USD in OTC spot transactions executed each day on average. Volatility makes it an attractive investment vehicle for many traders around the world, institutional and retail. Retail FX has been around for longer than 2 decades now, but we have yet to see the industry reach a mature state.
More than a few times over the past year, I have come across instances where companies have thought that they were paying for legitimate ASIC licenses when, in reality, that was not the case. There appears to be several “light fingered” agents operating in the market (particularly, in the Asia region) who are “selling ASIC licenses” at a discounted price.
Yesterday, I got an email from one of my old contacts thanking me for persuading him not to go into the retail FX brokerage business last year. The email was sent from the corporate domain of his new business venture, one that is apparently doing well with only a 30% involvement with the FX industry.
Do you think 2017 will be another big year for prime of prime? If so, you’re in very good company.
Our view is that, as the Chinese market matures, the 2017 trends in China could boil down to the following:
- Quality over price: sourcing liquidity from real prime of primes
There are several ways that an STP brokerage can make a profit. The broker may either charge their clients a commission ($X per $million), apply a markup to the price feed, or perhaps a combination of both.
In MT4, the commission charged to the client is typically set in deposit currency per lot ( In this article, we will be using US Dollars as deposit currency for an easy and clear explanation).
An STP brokerage can also choose to charge their clients a markup, which will be added into spread that their retail clients see. Markup is normally defined as points added per lot. Markup is usually invisible to your clients and tends to be more flexible as you have the ability to adjust the markup according to market conditions.
In 2016, we have seen some incredible market dislocation due to various global events (BREXIT, US Elections, OPEC, GBP Flash Crash, FOMC to name a few). Having experienced my fair share of these moves, I find myself in a unique position to be able to speak with a diverse group of market participants, ranging from Fund Managers to Hedge Funds and individual traders, each of them trying to successfully navigate through these turbulent markets.
Traditionally, December is the month when the majority of FX professionals take some well-deserved time off. Fund Managers are avoiding any major market participation that could negatively impact annual return statistics; bank employees are trying to use up their remaining vacation time, and the overall the spirit of holidays (Christmas, Hanukkah, Omisoka, Kwanzaa, and many others) makes December the perfect time to relax ahead of the January hype.
Topics: FX Liquidity
It’s no secret that we live in a technological world; a world where mobile has long become the prevalent vehicle for communication and business for all of us. Mobile now dominates the world’s search queries and mobile trading is reported to be responsible for around 30% of all trading at FX brokerages, with even higher percentages in Asia. As the world is adjusts to this new reality, the release of mobile apps, for its products, is now a must for FX brokerages and platform providers alike.
New technology is transforming how we do business in the 21st century, from the way we communicate, to the route we choose when we drive home from work and even the way we check our fridge for the food that we need. In the same way, the tech revolution has significantly changed things for sales professionals and the sales process. It seems that, every day, new platforms emerge that continue to transform the ways in which we communicate with prospects and that, undoubtedly, impact the way we structure our days.
Prime of Prime in FX, has undergone a lot of changes in the past few years, yet it remains one of the most highly demanded services in today’s marketplace. Prime of Prime’s role is to extend interbank market access to clients who do not have access to credit. To put it another way, it helps create direct market access for those clients who do not meet the stringent collateral and credit criteria that’s needed in order for them to establish their own, direct, prime broker relationship with a bank. The main value that a real Prime of Prime delivers is non-latent access to institutional trading, in a secure and regulated environment.
Topics: Prime of Prime