Achieving more effective Risk Management in Retail FX platform operations

Faced with a need for more effective risk management of their Retail FX customer positions, banks and brokerage firms in the FX space are being challenged by ballooning small ticket items, varying customer credit limits, risk mitigation issues as well strains on their back office processing capabilities. Roger Aitken talks to leading industry players to explore the key issues involved.

First Published: e-Forex Magazine 38 / Retail e-FX Provider / January, 2010

A Retail FX  customer base is very different from the traditional corporate and institutional client base of a bank or large brokerage firm. For a start client numbers are generally far greater and the pressures of servicing these customers who produce a greater percentage of small ticket FX trades, places an extraordinary load on the bank/broker systems, staff and processes.Whilst the credit crunch has forced firms to improve their risk management operations, the beauty of margin trading is that there are no credit lines, with clients posting collateral upfront with their broker or bank, and trading a multiple based on that figure. This multiple will depend on a number of factors, including the quality of the client, what FX products they wish to trade - from straight forward spot FX, FX forwards through to vanilla and exotic FX options. Automation is key Clearly to remain competitive and avoid potential blow-ups, firms need to step up to the plate and deploy cutting-edge technology in their risk...continued

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