FX Liquidity Prime of Prime

Year after SNB – FX industry transformation



In my opinion, last year’s SNB decision to remove the 1.20 floor on EURCHF acted as a catalyst, reshaping how we now view and approach the FX industry. As we observed throughout 2015, the SNB move radically altered FX technology and liquidity paradigms and the aftershocks of this “seismic” shift are still being felt today.

Some notable trends emerged in the post-SNB world in 2015: –
Executive moves

  • An industry-wide reshuffle occurred with seasoned Industry names changing roles and/or companies, signaling significant market restructuring.

Summer Cyber-Attacks

  • The FX industry was hit by the wave of cyber-attacks that caught many FX brokerages’ platforms and websites off-guard causing extensive downtime and severely damaging brands and businesses.

Credit Crunch

  • Credit tightening took hold, forcing market participants to re-evaluate their business models and look for quick alternative solutions. “Prime-of-prime” solutions became more relevant and highly demanded, and many brokers began to embrace the reality of being one step removed from the banks. As “prime-of-prime” became a buzzword, Advanced Markets made an effort to clarify exactly what a real “prime-of-prime” is and, more importantly, how to make sure that you are dealing with a legitimate one.

Profit Sharing

  • The Profit sharing model, as a way of generating extra revenue, became one of the major casualties of the year as it turned out be more of a barrier to profitability, rather than the answer. Many profit sharing plans, promoted as the answer by FX brokerages and advisors, failed miserably and negatively impacted those firms depending on their success.

As the market changed and participants adapted to the new world in FX, we have found ourselves being asked many questions that didn’t seem relevant or a priority before:

  1. How do you protect from negative account balance?
  2. Do you offer profit sharing?
  3. Can you aggregate our LPs (Liquidity Providers) on margin?

Here, at Advanced Markets and Fortex, I have seen one of the busiest years to date in my career. Our entire team worked relentlessly to help our clients achieve their goals in 2015 and to make their businesses more successful.

At the beginning of the year, we had one particular client come to us who had previously worked as a money manager through a retail FX firm. Their book of business included over 1,500 active investors and incorporated several successful strategies. In the past, they had encountered no problems finding good strategies and stellar traders, but immediately post-SNB, this money manager found themselves in rough shape as their broker took a decision to adjust trades post-execution, erasing yearly profits.

The money manager decided to look into going “solo” and assessed what would it take to run their own fund. They were shocked when confronted with estimates of more than $200,000 to just get started and felt themselves trapped in the vicious retail FX circle, having to deal with inappropriately set MAMs, excessive markups, ECN fees, and much more.

It was at this point that they approached us, asking general B2B FX questions while looking at all the options available to them to grow their business. They were surprised to learn that they start their own business now (not 5 years from now!) with no setup fees, with institutional spreads, true STP execution, enterprise level technology and all with complete ownership of their clients and business-related data. The package even came with an experienced support team, ready to help them out 24/7.

Now, one year later, after obtaining a hedge fund license in a “tier 1” jurisdiction, the business is growing and recently turned in an 8% annual return for their investors. “A penny saved is a penny earned!”

By entrusting technology and execution to competent vendors, you can reap the rewards from your core business and invest the money saved into further expansion. In the FX market, it’s all about finding the right vendor. We’ve all seen the commercials and marketing pop-ups from FX firms promising this and that but understanding what’s really behind each of these offerings is a real challenge in a fragmented FX community. We at Advanced Markets understand the problems being faced by new B2B FX market entrants and have therefore developed a series of educational articles that address the hottest industry questions and destroy the most popular myths.

With regard to our business offering itself, throughout 2015 Advanced Markets and Fortex introduced multiple value-adds designed to help clients run their businesses more efficiently and achieve better profitability:

  1. We secured UBS, one of the world’s leading banks, as our primary “Prime Broker”.
  2. We introduced a turnkey “Quick Start Brokerage Program” for clients looking to get started with FX brokerage
  3. We expanded our institutional offering to include a number of CFD instruments
  4. We upgraded our network infrastructure and introduced Fortex Premium Hosting packages within our dedicated facilitiesat NY4 and HK3
  5. We launched Fortex WebTrader, a fully-responsive, next-generation web trading platform.

Advanced Markets and Fortex continue to impress with their platform stability, reliability and professional approach. The firm has a number of new initiatives that we look forward to sharing with you in 2016.
I am sure that 2016 will bring yet more changes in the world of FX, and we may see the end of business trends that used hold relevancy in the past. FX market participants will therefore need to embrace those new trends and ideas that take their place, and act strategically in order to achieve greater efficiency and competitiveness in the coming year.

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