Moving past 2020: What institutional traders should look for in a broker
Last year was full of ups and downs, but there were plenty of lessons to be learned for traders. Despite this, how to survive, how to thrive, how to remain competitive and the importance in what to look for when selecting a broker remain a priority, writes Mario Sanchez (pictured), Managing Director and Global Head of FXCM Pro Sales.
As we begin a new year, it is the perfect time to reflect on what the priorities should be in 2021 when working with a broker. Everyone faced a fundamental test in their way of working last year, but in my experience, four main things make or break the promise of a good broker. These are providing accessibility, liquidity, connectivity and technology.
Accessibility – giving traders what they need
The market is full of choice for institutional traders. What to trade, how much exposure to take on, where to trade, which broker to use; the options are endless. However, sleek marketing will only go so far when it comes to attracting institutional traders.
What keeps them in the room is far more important to focus on than what gets them through the door. Fundamentally, it begins with accessibility – giving traders the ability to trade what they want, when they want – in a regulatory compliant and cost-efficient manner.
It has to be easy to open a trade, access the right data to keep track of all trading positions and close them at the best price. The platform itself has to be intuitive, with a range of monitoring tools. Outdated technology, lagging data and systems prone to crashing will not survive, and headlines have shown many examples of that.
So, choose the broker that meets the modern requirements of an institutional trader and offers the services which make it worth your time. As competition grows fierce, traders are rightfully expecting better bang for their buck.
Liquidity – keeping the market moving
Liquidity is the lifeblood of financial markets. In 2020, unprecedented market conditions led to strained liquidity in some assets, while increasing in others. Whether things are calming down or not, brokers must be able to provide tailored and customisable liquidity solutions to their clients.
In the institutional trading space, this is especially the case. Access to global pools of liquidity is a key competitive advantage that cannot be ignored. But it also goes beyond that; a positive and engaging client experience is crucial.
Brokers must tailor and source liquidity providers for specific client needs, be that on single tickets, large orders and everything in between, or the trader, will be left at a disadvantage.
More often than not, the delivery of such a standard of liquidity will have to be a team effort forged with market-leaders specialising in precisely that. Leveraging special relationships with a broader team of providers will only enhance a broker’s offering and their competitive advantages.
Connectivity – market access when it is needed most
Even before the crises of 2020, smaller non-bank financial institutions struggled to gain efficient market access. In an era of remote working, some smaller trading institutions were cut out from the markets and unable to participate without indirect access or accruing high costs.
Such operating practices need to be consigned to the history books.
All-to-all trading models have thrived for good reason and it’s time for brokers to recognise this. Retail brokers, emerging market banks and small-to-medium-sized hedge funds are key players in the marketplace and responsible for significant levels of trading activity.
With the right risk controls and connectivity infrastructure, such as what Flextrade’s technology provides in our LD4 hub, brokers can facilitate access to market participants of all sizes and pave the way for a more vibrant trading community.
For our clients to make full use of different connectivity options, we have either established or consolidated partnerships with oneZero, Integral, TrueFX, FlexTrade, PrimeXM, Gold-I, Your Bourse and Devexperts, to name a few.
Technology – the backbone of successful trading
Once not so long ago, opening a trade used to be a long and cumbersome process. But over the last decade or so, trading solutions have been developed using smarter and more sophisticated technology. We have become accustomed to efficiency and ease, but there is no room for complacency in a market as dynamic as ours. To continue serving clients in a fast-evolving market environment, brokers must keep up with structural and infrastructure changes or risk losing their customers.
Today’s clients expect more from their brokers. Automated risk management solutions, electronic and voice trading availability, and ultra-low latency technology are necessary parts of the broker’s offering – be they achieved through specialised third-party vendors or built in-house.
Strategic partnerships with market-leading technology providers such as Flextrade, oneZero, Integral, TrueFX, Prime XM and Gold I, have proven their worth this year and have kept us at the cutting edge of tech.
Recognising the specific needs of different types of clients, such as brokers, we have established partnerships with some of the biggest names in this space, including Devexperts, Itexsys, Tools 4 Brokers, FX Cubic, PXM and Centroid.
Adapting to changing times
The market doesn’t stand still, and neither do its participants. If you don’t keep moving with the times, you will be left behind. With the right technology, brokers can weather any storm and future-proof their trading operations – all while delivering the high standards of service clients deserve in today’s environment.
FXCM Pro provides retail brokers, small hedge funds and emerging market banks access to wholesale execution and liquidity while providing high and medium frequency funds with access to prime brokerage services via FXCM Prime. FXCM is a Leucadia company. For further information, please visit www.fxcm.com/pro
FXCM Pro offering and services are intended for institutional and professional clients. Trading on margin carries risk.