With high frequency trading estimated to account for more than 50% of the trading volume in the U.S. and more than 25% in Europe, the number of available price updates (ticks) per second has become an important criteria for FX Brokers, HFTs and Fund Managers when choosing a liquidity provider.
Topics: Traders, Platforms & Technology, Forex Brokerage, Start Your Own Forex Brokerage, Algo Trading, MT5, MT4, MetaTrader, Wholesale FX, FX Technology Provider, FX Liquidity Provider, Institutional Trader, Institutional Broker
FIX API has been a trending phrase amongst Forex professionals for the past decade. The technology has proven to be the fastest and one of the most secure ways to trade in FX.
A FIX API is an application programming interface (API) that uses FIX protocol. It connects FX Liquidity makers with takers. In our case, FX FIX API is a way to connect directly with a particular Liquidity Provider or aggregator.
Recently at an FX conference, a developing fund manager and I crossed paths. After a few polite introductions, I quickly realized that, based on his audited returns, the new fund manager was proficient in trading the FX market. The detailed description of the fund’s fundamental and technical trading strategies was welcoming to hear.
After a few routine questions from the prospective client, the topic promptly turned to spreads and liquidity (my favorite). The fund manager was comparing pricing between FX brokers and asked why spreads are so contrasting amidst all of the firms in question.
Topics: FX Liquidity, Thought Leadership, Forex Brokerage, Start Your Own Forex Brokerage, Brokerage, SYOB, FX Broker Startup, Forex B2B, Regulation, Wholesale FX, Institutional Trader, Institutional Broker
The European Securities and Markets Authority (ESMA) has implemented a range of measures intended to protect retail clients who are trading leveraged products, such as CFD’s.
The product intervention measures mandated by ESMA, under Article 40 of the Markets in Financial Instruments Regulation (MiFID II) include:
- Maximum leverage limits on the opening of a position by a retail client ranging from 30:1 down to 2:1.
- A margin closeout rule on a “per account” basis (at 50% of minimum required margin).
- Negative balance protection on a “per account” basis.
- A restriction on the incentives offered to trade CFDs.
- A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor book.
- Prohibition on the marketing, distribution or sale of binary options.
Topics: Traders, FX Liquidity, Forex Brokerage, Start Your Own Forex Brokerage, SYOB, FX Broker Startup, Forex B2B, MiFID2, Wholesale FX, FX Liquidity Provider, Retail Trader, Retail Broker, Institutional Trader, Institutional Broker
2018 was a challenging year for retail FX brokerages with many of them being sold over the counter and others struggling to implement the new rules mandated by regulators.
What we can say is that 2018 was first and foremost a year of new regulation. Legal teams have been working hard to structure businesses differently and/or adapt to the new rules. Quiet contrary to the goals of the regulators’ goals, offshore is once more becoming the broker’s common strategy, especially to continue to offer high leverage to retail clients.
Generally, compared to the software industry where we are looking at average multiples of 21-25 times EBIDTA, M&A transactions in the retail FX broker space are showing multiples of 5-10 times EBIDTA at most for the best deals we have seen recently.
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.
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.
Topics: Traders, Forex Brokerage, Start Your Own Forex Brokerage, Brokerage, SYOB, FX Broker Startup, Regulation, MiFID, MiFID2, Retail Trader, Retail Broker, Institutional Trader, Institutional Broker
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.
For the better half of 2017, brokers and trading firms, falling under the reach of MIFID 2, were very busy implementing the parameters and protocol needed in order for them to comply with the new regulatory standards.
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.
From social media strategy to content creation, what are the steps to take to reach the 1.4 billion-people Chinese market?
Penguin Intelligence, a research agency subsidy of Tencent, recently reported that as of Q4 2016, there were 889 million active users monthly. People are spending, on average, 66 minutes each day on WeChat with 57.22% of new WeChat contacts added for work-related matters and 6.04% service providers. Over 80% of users used WeChat group for work-related purposes with WeChat group becoming an important venue for business communications.
These statistics clearly indicate that WeChat is the potentially the most powerful platform through which to reach new leads and clients for your business.
by Natallia Hunik, Global Head of Sales at Advanced Markets & Fortex, Inc. and Ron Finberg, Head of Business Development at Cappitech.
MiFID II has been the focal point of many discussions in the European financial world recently. We have previously focused our attention on several of the main aspects of this upcoming regulation, such as Best Execution Policy, Reporting Framework Updates and Tied Agents Designation.
In this article, I would like to elaborate further on some of the reporting mechanisms that are being put in place by one of the world’s most respected financial regulators, the U.K’s Financial Conduct Authority (FCA).
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).
The Master Account serves as the primary (and the only real) trading account, and sub accounts receive the results of the actions performed on the Master Account (only proportional COPIES of the original trades).
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.
Topics: Traders, FX Liquidity, Forex Brokerage, Start Your Own Forex Brokerage, Regulation, MiFID, MiFID2, FX Liquidity Provider, Retail Trader, Retail Broker, Institutional Trader, Institutional Broker
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).
MetaTrader 5 bridges are now beginning to emerge, and the speed of their development is directly correlated with the very recent growth in MT5 adoption rates.
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.
Regardless, what is clear at this point is that there are a number of significant changes that are coming down the pipe for the FX brokerages.
Topics: Traders, Forex Brokerage, Prime of Prime, Start Your Own Forex Brokerage, Brokerage, SYOB, FX Broker Startup, Licensing, Regulation, STP, MiFID, MiFID2, Institutional Trader, Institutional Broker
While some industry sources are arguing whether or not MiFID II will dramatically affect the FX industry, most FCA and CySEC licensed FX brokers are rapidly adjusting policies in order to comply with the new requirements.
One of the key changes of MiFID II is an implementation of the term “best execution” and a directive to ensure “All Sufficient steps” (Article 64 -4) are in place to support that.
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.
Watch our videos to the topics
- FX Prime Brokerage
- Future of Industry in Cyprus
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.
Two decades might be just an infancy stage for an asset class, one would say, and would be right.
Regulatory frameworks in many countries are not greatly fine-tuned to deal with FX or are not encompassing FX at all.
Topics: Traders, Thought Leadership, Forex Brokerage, Start Your Own Forex Brokerage, Brokerage, SYOB, FX Broker Startup, Regulation, STP, Leverage, UK FCA Broker, Retail Trader, Retail Broker, Institutional Trader, Institutional Broker
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.
As we all know, there is no such a thing as free lunch. The use of words such as “discounted” and “fast-track”, with regard to obtaining a license in a reputable regulatory jurisdiction, should have immediately raised your eyebrows.
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.
His experience has inspired me to write a short article that can serve as a wake-up call to anyone contemplating starting their own FX Brokerage.
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
- Looking for robust technology and connectivity solutions that scale
- A move to MT5
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.
Topics: Traders, FX Liquidity, Forex Brokerage, Start Your Own Forex Brokerage, Brokerage, Forex B2B, STP, MT4, Wholesale FX, FX Liquidity Provider, Retail Trader, Retail Broker, Institutional Trader, Institutional Broker