Prime of Prime Brokerage – How to Structure Your Brokerage?
Trade execution in OTC derivatives is a burning issue among regulators and clients, as is how to source genuine liquidity. In an interview with Andrew Saks-McLeod, founder and CEO of Finance Feeds, we go into detail on how to make sure this is done to your advantage, and done properly.
Discussion centers around sourcing the right liquidity, changes that are coming along with Mifid2 and how FX brokerage companies can adapt in this environment.
In the light of this new regulatory regime, best execution clause is a cornerstone. Companies should be seeking liquidity providers not just on sole pricing basis, but need to ensure that other criteria are taken into account, such as speed of execution, quality of the price feed, counterparty risk (currently being vastly ignored).
Customers also should exercise power given to them by Mifid2 and demand transparency, ask for the execution details and who was on the other side of their order.
The more transparent FX brokerage structure is, the better it is for all the stakeholders involved. Plenty of traders out there do not really care who is on the other side of their trades as long as you deliver decent execution, do not stand in the way of the client’s execution and offer fair trading environment. There is nothing wrong about being open about your business model. Transparency is something that modern society really appreciates and seeks out, whether its about knowing how Facebook uses your personal data, or where does your broker send your trades for execution.