Taking a more centralised approach to risk management in retail FX brokerage activities

Retail FX brokers face a plethora of challenges on a daily basis as they navigate the risks thrown at them by the markets across multiple front-ends, servers, clearing relationships and client segments. With major events such as the Swiss National Bank (SNB) debacle adding to the strain and even causing the collapse of some companies, Heather McLean discovers why it is now more important than ever for brokers to improve control of trading systems and better analyse, manage and hedge customer order flows in order to avoid being blindsided by unexpected market events.

First Published: e-Forex Magazine 61 / FX Brokerage Operations / July, 2015

When talking about the main operational challenges facing retail FX brokers as they try to monitor risk across multiple front ends, servers, clearing relationships and client segments, Advanced Markets’ executive chairman, Anthony Brocco, states that the risks are really dependent on the business model of the broker. He explains: “In a legitimate STP-only environment, technology and accurate real time information is paramount. Ensuring that your positions are always matched between your PB and your clients is the most important factor. Reliable seasoned technology has been the key to achieving that. Having technology that can monitor clients’ accounts in real time, that does a pre-margin check on each trade attempt that includes resting orders and has the ability to close out al of the positions in a timely manner if necessary are critical in protecting not only our capital, but our clients as well. It is also important that you have great liquidity behind the technology, which is why...continued

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