New Product: As all-new MT-compatible multi asset solution goes live, diversification is now paramount for FX brokers

For many years, FinanceFeeds has advocated the need for retail FX brokerages to cost-effectively elevate their business potential by offering exchange-traded, multi-asset product range via their existing platforms, be they proprietary or off the shelf systems such as MetaTrader 4 and 5.

It has been exactly two years the establishment that dominates the retail OTC trading industry was dealt a somewhat unpleasant blow by the Financial Conduct Authority (FCA) in Britain in the form of proposed new rulings on how CFD products can be offered on an over the counter (OTC) basis.

Among the proposals set forth by the FCA which have now been fully implemented, were a series of criteria, including leverage restrictions, which resulted in a thought process among industry leaders that the large executing venues may well be lobbying the regulatory authorities in order to attempt to move the OTC industry onto exchanges.

As is often the case, many innovations must once again take place in order to ensure that the retail trading industry is future proofed enough to be able to continue to lead the way ahead should any attempt at placing it on exchange be successful.

Indeed, it may well be that the regulatory authorities, despite the absence of them having verbalized or committed these thoughts to writing, quite simply want to drive all retail electronic trading onto exchanges, for various reasons, which should not be seen as a curtailment but as an opportunity.

It’s the quiet ones that are often the dark horses, especially among firms that cater toward the financially conservative British retail electronic trading sector.

In developed regions with world-leading financial markets economies such as Britain, very few non-domestic companies are anywhere to be seen with regard to market share, and the London-based CFD and spread betting giants dominate, knowing their customer well, garnering loyalty and ensuring a 30 year presence with a largely British customer base.

British investors may well be conservative and prudent, but they are very technologically analytical and expect to be provided with proprietary trading systems that are developed, supported and continually evolved in the way that only London’s world-leading FinTech sector can provide.

Multi-asset trading environments, offering connectivity to massive asset bases is a pre-requisite in order to engage British investors, who are usually well-read, strategic and pragmatic.

Thus, there is now a fully accessible multi-asset solution for retail brokers which allow the trading of spot OTC derivatives on the same platform as multi-asset exchange listed futures and equities.

This not only elevates the potential client base of brokerages, as it accesses the equities and futures traders on exchanges, many of whom reside in first tier regions such as the United States, Singapore, Hong Kong, Australia and Switzerland but also generates a highly sustainable environment for brokers in which long-term traders with less leverage and larger capital margins operate, bringing them into the realms of the portfolio holders rather than CPA/lead conversion short term business.

As regulation ebbs toward limited leverage and looks to encourage brokerages to provide exchange-traded, less high risk investments, maintaining existing client bases on a familiar trading environment whilst extending the new product to them, and in the process bringing on board equities and futures traders has to be a good move forward.

The result of a joint development between newly established Australian entity Markets Direct, Danish professional trading platform development company NetDania and Chicago-based high-performance trade routing, global market data, and advanced technical analysis company CQG, itself massively entrenched within the exchange traded derivatives sector in its Illinois heartlands, the new solution has now gone to market.

FinanceFeeds was the first to view the new trading environment during a private meeting in Sydney, Australia last week, in which the executives that led the project met to demonstrate it.

Stig Brylle, CEO and co-founder of NetDania, explained to FinanceFeeds during a private meeting in which the new product was shown exclusively “The new B2B multi-asset solution offer financial institutions maybe the most complete solution available in order to attract and retain clients.”

“The combination of commission free stock trading on 3,500 US stocks and ETFs, futures, FX and CFD trading along with CQG’s outstanding global connectivity and order routing technology which connects to NetDania’s mobile trading app and NetDania’s desktop app, incl. trading from Microsoft Excel (the world’s largest algorithmic platform provide a full end to end solution for multi-asset connectivity for brokers” said Mr Brylle.

“We have built in App Analytics allowing financial institutions to do targeted marketing, thereby increasing retention and conversion rates and superior HTML5 website package with charts, rates, news and calendar Trading Central Analyses which fully integrates with MetaTrader 4 and 5” said Mr Brylle.

“The entire package can be fully branded in the name of the financial institution, which makes this cross margin multi-asset solution very attractive for brokers and banks. I expect that several of our customers will adapt the solution” concluded Mr Brylle.

From a brokerage point of view, New York-based Tom O’Reilly, Senior Vice President of Sales at FXDD was present during the meeting in Sydney. Mr O’Reilly is a veteran FX industry senior figure with over 40 years experience in the business. He explained “We’ve witnessed many changes in the recent past that have greatly impacted the traditional ways of executing business, across both the institutional and retail sectors.”

“These are primarily a result of rapid and necessary changes in the regulatory domain, restrictions in capital flows in many prime countries, and just a natural maturation in the life cycle of the FX brokerage business. More visible changes are apparent in the nature of “retail” flow, the shift to digital marketing, and the increase in numbers of new MetaTrader brokers globally” said Mr O’Reilly.

“I believe there is no better time than right now to present a multi-asset cross margined offering that includes not only FX, but other supporting exchange products including futures, equities, and more to follow. We feel strongly that we’ve assembled a strong pedigree of firms to carry out this venture. This is the future and the way forward” concluded Mr O’Reilly.

Joe O’Mara, one of Chicago’s longstanding listed derivatives senior executives, obtained the Australian Securities and Investments Commission (ASIC) license for the new solution in order that it can be provided as a holistic multi-asset system for brokerages.

Speaking to FinanceFeeds in Sydney last week, Mr O’Mara explained “All of us involved in markets direct would like to thank Andrew and FinanceFeeds for hosting us at the Sydney Cup. It was a good mix of industry professionals who collectively showed a great interest in our offering.”

“We think with regulatory changes forthcoming, it is more important now than ever to offer clients the ability to trade both on-exchange and off exchange products. With the ability to cross margin these products, trade on a sophisticated mobile app like NetDania, and a top notch desktop app like CQG, we are giving a one of a kind offering. Although we are in a preliminary soft launch mode” said Mr O’Mara.

The advent of the interest by exchanges in bringing retail business on board was initially demonstrated by a series of mergers and acquisitions, led by exchange companies which purchased OTC derivatives companies to quickly gain access to that sector, rather than develop their own inroads, as demonstrated by various discussions held by FinanceFeeds within the listed derivatives sector in Chicago as many firms begin to target the higher end retail customers.

It is worth of note that at the time during which Deutsche Boerse bought 360T and Hotspot was acquired by BATS Global Markets, ICE in Chicago was preparing its offer to buy FastMatch for between $150 million and $250 million, as further testimony to the will of the giant exchanges to mop up the minnows of the OTC world.

FinanceFeeds spoke recently to Euronext’s CEO and CFO with regard to the finer points involved in its acquisition of FastMatch, which also highlighted a synergy in this direction.

The marriage of OTC retail brokerages and listed derivatives giants is most certainly a good method of making progress, not just for the derivatives exchanges wanting to access a retail market, but also for retail brokerages to sustain a good quality business plan for the future.