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March 27, 2024 - I was asked by Liquidity finder to give my view on the journey of a retail broker, branching out into the Institutional space.
I spoke with Finance Magnates a few months back and highlighted that the increasing number of brokers entering the institutional market has resulted in narrower profit margins. Regulatory changes and tightening in the retail FX space has prompted many retail brokers to seek growth opportunities in the institutional space where regulations may offer more flexibility or where adaptation may be more feasible..
In my view, the competitiveness of institutional market rivals that of the retail sector. Brokers venturing into the institutional space seek access to larger trading volumes, secure a more sustainable income streams and mitigate firm exposure to risk.
While expanding from retail to the institutional realm demands effort and adaptability, there exist significant prospects for brokers to seize upon the escalating demand for institutional-grade services and carve out prominent positions in the institutional FX market. Nevertheless, this endeavour is not devoid of risks and requires considerable investment, time and resources.
Catering to institutional clients entails offering additional products and services and for this, requires a considerable budget for technology as well as man power, especially if setting up an in-house dealing desk. One of the ultimate objectives for any broker in this space is to have direct Prime brokerage relationships to ensure competitiveness in their liquidity offering and less reliance on existing Prime of Prime Counterparties.
Overall, expanding into the institutional space definitely presents new opportunities for revenue growth and market expansion for retail FX brokers and can take a broker to the next level, but it doesn’t come without its set of challenges. From my experience, a skilled and cohesive team, significant effort and perseverance, lead the way!
As well as Liquidity, Vantage Connect provide solutions for Risk and technology for Clients, which include hedge funds, family offices, brokers, and asset managers.
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Author
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Tal Dar is VP of of Institutional Sales at Vantage Connect, and has over 12 years of experience within the eFX & CFDs space. He joined Vantage from Phillip Capital where he was Head of eFX and Derivatives. He brings with him a wealth of experience within the industry having headed up Sales, operations and product functions for various FCA regulated brokers.
Tal can be contacted here. |
