How can a retail broker keep clients longer and stay in business? – CFH Clearing’s Marc Hoyer Levin elaborates

Executives, owners and shareholders of retail FX brokerages have so much to consider these days, even after being in business for several years as the continual adaptation of our industry takes place. On this basis, starting a new FX brokerage from scratch in today’s fast moving and crowded retail sector is not for the feint […]

liquidity

Executives, owners and shareholders of retail FX brokerages have so much to consider these days, even after being in business for several years as the continual adaptation of our industry takes place.

On this basis, starting a new FX brokerage from scratch in today’s fast moving and crowded retail sector is not for the feint hearted, and certainly not a feat to be underestimated. To gain a comprehensive understanding of what to do, what not to do and how to avoid any potential pitfalls, FinanceFeeds spoke to Marc Hoyer Levin, VP Business Development at CFH Clearing, who explained his perspective.

Supporting start-Up brokers

Start-up costs for new brokers depend on how ambitious they are and what kind of brokerage they are setting up – riskless principal, market maker, etc. As a general rule, they will need a strong balance sheet. In fact, this is even more applicable post the SNB event as Liquidity Providers now do enhanced due dilligence and stricter counterparty risk assessments.

I recommend that start-up brokers who are looking to grow a reputable business should begin by operating within a recognised jurisdiction. This shows from the outset that they are serious about their business and gives them credibility within the market.

I realise that cost and timeframes may prevent some start-ups from going down this initially – but it’s certainly important to consider jurisdictions, perhaps with the intention of scaling up to a higher regulatory status once the business has been established. In my view, regulation within Europe is ideal and preferably the FCA (Financial Conduct Authority) in the UK. The message this sends out to clients is that their funds are safe with you, that client money is held in a credible bank account, and that you are a professional business, with high standards, keen to operate with integrity.

A new broker will also need a basic CRM system which can be integrated with their technology, and a payment system which can facilitate multiple types of payment options.

Ideally, a start-up broker should outsource as many functions as they can from the outset – other than sales, marketing and client servicing. It is key to find the right partner from day one in terms of liquidity and technology – a partner who can offer them control, scalability and flexibility through their future growth phases.

What solution does CFH Clearing offer for early stage brokers?

CFH Clearing offers a range of White Label front-end platforms– an easy and cost effective way for brokers to get started.

We have experienced significant demand from early and mid-stage brokers since we launched ClearVision – a ’broker in a box’ solution which gives them all the trading and back office tools they need to run effectively. With ClearVision, brokers can manage liquidity, risk management, collateral and reporting all from a single solution.

I think it’s been well received by brokers across the globe because it doesn’t put any restrictions on them in terms of scalability and flexibility. Brokers can also customise the tools to suit their particular requirements. Whilst the majority of our clients using ClearVision are ’adolescent brokers’ looking to take their business to the next level, we do also service start-up organisations. They welcome the fact that we can take them through their whole lifecycle – from an early stage right through to the point when they need their own Prime Broker.

nick mortimer cfh

I see many brokers who start out with cheaper solutions face significant disruptions in their business when they get to a certain size as they need to migrate to new systems and find a more suitable technology or liquidity partner to accommodate their next growth stage. It’s a major advantage for an early stage broker to partner with CFH Clearing as they won’t need to change their infrastructure during their growth cycle. They also have the flexibility to add to their product offering as they grow, without any restrictions or limitations.

Finding the right partner is key

When selecting a technology partner, it’s not just the technology and infrastructure itself that brokers should assess. They also need to feel confident that the partner they choose can offer consultancy and guidance to help them to grow.

CFH has a highly experienced team in offices all over the world and we travel extensively to meet clients globally. As a result, we have great insight into how different brokerages are structured, how their businesses operate, local success stories and the impact of particular cultures and jurisdictions on their business practices. Our global and regional insight is invaluable to clients – we have an enormous network and a wealth of experience which we share with our broker clients to help them to thrive.

How can a retail broker keep clients longer and stay in business?

Retail brokers need to offer a differentiated experience. They need to identify a USP in order to attract clients and have a competitive edge. There is little point in setting up as an MT4 broker and offering exactly the same experience to clients as other MT4 brokers in the same region.

The key to retention is to make the retail trader ‘sticky’. Technology has proved to be a useful tool to tie in a trader – and we’ve been able to add value to our broker clients by offering alternative trading platforms to MT4. Platforms such as ClearPro, Tradable and NetStation are popular alternatives to MT4. Once retail traders get ‘hooked’ on trading on these platforms, they are much less likely to move away to another broker.

Brokers can also White Label our FIX to facilitate a higher segment of the market, which opens a new set of doors and helps attract and retain clients.

What common mistakes do start-up brokerages often make?

One of the biggest mistakes is that they think they can buy an MT4 platform and then the clients will automatically come to them. That’s definitely not the case. They need to think about how they will position themselves and how they can differentiate themselves in a very saturated market.

Retail brokers today are primarily marketing machines. As I mentioned earlier, they should outsource traditional functions, such as legal, compliance and finance, freeing up their time to focus on sales and marketing. Their main priority at an early stage should be to attract and retain clients. Only once they have achieved a solid mass should they think about maximising profits and consider areas such as STP vs B-Book vs Profit Share. They need to bump up the flows first and then they can start to optimise the books internally.

ClearVision’s reporting tools provide the intelligence they need to maximize the profits on their books in terms of STP, B-Book and Profit Share setups, and subsequently configure the systems accordingly.

Any opinions, news, research, analyses, prices or other information contained on this story, by CFH, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. CFH will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Read this next

Digital Assets

TRON approves Wintermute to mint, burn USDD stablecoin

TRON Reserve DAO has welcomed crypto market-making giant Wintermute as the ninth member and whitelisted institution to mint Tron network’s stablecoin, Decentralized USD (USDD).

Metaverse Gaming NFT

Nas Academy and Invisible College introduce innovative model for Web3 education

Singapore-based online learning platform, Nas Academy is joining forces with Invisible College to teach people everything they need to know about the Web3.

Digital Assets

Top exec at BitMEX pled guilty US Bank Act violations, pays $150K fine

BitMEX’s head of business development, Gregory Dwyer pled guilty to violating the US Bank Secrecy Act (BSA) and allowing customers to use the platform to circumvent the federal anti-money laundering rules.

Retail FX

CySEC slaps €150,000 fine on FXBFI, operator of 101investing brand

The Cyprus Securities and Exchange Commission (CySEC) today announced that it has reached a settlement with FXBFI Broker Financial Invest Ltd, trading as 101investing, ordering the firm to pay €150,000 for violating the Investment Services and Activities and Regulated Markets Law.

Retail FX

X Open Hub expands multi-asset offering with new cryptocurrencies and indices

X Open Hub, a multi-asset liquidity provider, announced today that it has extended its offering with inclusion of 30 new cryptocurrencies and two emerging market indices.

Retail FX

Interactive Brokers now offers 24/7 access to crypto trading

Interactive Brokers Group, Inc. (NASDAQ: IBKR) has widened access to cryptocurrency trading for its clients. Specifically, the discount broker extended trading hours for its cryptocurrency products to be traded 24/7, including on the weekends.

Inside View

Natural Language Generation for Multi-Language Social Media Strategies 

Natural Language Generation (NLG) is a crucial growth area in the digital landscape, with the unique potential to be used across multiple industries.

Market News, Technology

The B2Core Android App is Now Available For Download

The first version of the B2Core Android app is available for download, and it has many beneficial features for users.

Digital Assets

XBO taps custodian Fireblocks ahead of crypto exchange’s launch

XBO.com has integrated with digital asset and crypto technology platform Fireblocks ahead of the crypto exchange’s upcoming launch.

<