Binary Options Update - Development Decisions: In-House vs External Platforms?

For those wishing to establish a binary options brokerage, the de rigeur method of commencing operations with a sales team and a complete white label solution from one of the platform providers has enjoyed continuous popularity over the last three years.

For many white label brands, this method facilitated a very straightforward and time-efficient entry into the market, without development costs and in some cases, without having to conduct any Risk Management or trading desk activity.

Lionstone Favors In-House Development

There are indeed, as well as the plethora of white label binary options brands, many retail FX firms which have added binary options to their offering by connecting their customer databases to off-the-shelf platforms via shared wallet solutions.

As with any relatively new industry sectors, evolution is beginning to make its presence felt within the binary options business, as some firms begin to internalize the technology aspect of their operations.

Lionstone Investment Services’ announcement today that it has released an in-house developed binary options Trading Platform which is directly connected to MetaTrader 4 is a case in point.

The company, whose mainstay is FX and CFDs offers two platforms, one of which is ActForex’s ActTrader, with the other being MetaTrader 4. Until now, many firms wishing to add binary options to their offering have opted to provide binary options by using external platforms, some of which are large companies, as in the case of Alpari’s adoption of the MarketsPulse platform for the CIS region, and SpotOption’s platform for the British market.

“We have developed this platform to give clients more choice,” stated Alexandre Beliakov, President of Lionstone Investment Services on behalf of his firm.

“A customer can choose whether to trade currency pairs, binary options or both at once. At the same time they are free from the inconvenience that a third party binary option platform may bring, such as opening a separate account and using unfamiliar payment processing systems.”

Lionstone had offered a different platform previously, and according to the company, it was the first to introduce binary options to the Russian and CIS market back in 2010. Since then, Lionstone took the decision to re-engineer the platform to allow traders more freedom and a guarantee that their information stays with the broker.

The future development of the platform is to offer institutional white label packages focused on providing brokers with full control of their binary options offering with the company noticing an exponential increase in demand for binary options in Russia and the CIS region, with mid 2012 having being a particularly significant point at which the rate of growth accelerated to today’s level.

Off The Shelf vs Internal R&D - What Are The Advantages?

In order to ascertain further potential drivers who could encourage firms to invest in the development of their own platforms, Forex Magnates spoke to firms who recently went down this route.

Maor Lahav, COO of Panda TS, which provides shared wallet connectivity to FX firms in order to connect to off-the-shelf binary options platforms purchased Polar IO in May this year, in order to expand into providing its own proprietary platform in the form of an out-of-the-box solution.

Mr Lahav explained to Forex Magnates today with regards to going the step further and developing in-house platforms, “This topic is currently hot, and a lot of new and existing FX operations are looking to find insights into the methods by which this can be done. Conducting research into costs, the components required and whether hybrid models are viable for example, are all matters of current interest”.

There are indeed schools of thought which concur with the off-the-shelf platform option. Eyal Rosenblum, Co-CEO of binary options software company TechFinancials, proffers the viewpoint that effective platform development is best conducted by specialists who can design a pricing mechanism that will stand user scrutiny. “The binary business and platforms is a relatively new evolving market, and as such the offering and technology is changing fast with traders and brokers' ongoing changing requirements,” he explained to Forex Magnates.

“As a technology provider in this market, I can clearly see the difference between a simple high/low system that was developed for self-usage, and a system that already has 5 years of accumulated R&D efforts, improvements based on inputs of dozens of brokers and thousands of traders, sophisticated pricing mechanism developed and improved over the years and based on tens of millions of real trades, a continuous launch of new products that increase interest and user satisfaction, and therefore brokers volumes and profits, and much more,” is Mr. Rosenblum’s perspective.

He concluded that, “I find it hard to believe that in-house product development can go even close to the above mentioned methodology. In addition, the name of the game is focus, and therefore, a broker focused on technology will not be as good as a broker's focus on marketing, sales and operations.”

Shay Hamama, VP of Business Development at MarketsPulse spoke in detail to Forex Magnates on this subject today: "It has been seen time and time again from some of the largest companies in the industry, investing time and money into developing a product that has already been made and tested does not outweigh the profit and benefits that can be made by using pre-existing technology sooner than later."

"The Binary Options industry in particular has grown tremendously in the past few years and software companies are developing beyond the simplicity of a platform for traders. MarketsPulse invests much time and resources to researching the industry and with the addition of the information gained through our experience we are able to provide clients an advanced platform," continued Mr. Hamama.

"Furthermore, the industry isn't black and white, in- house or off- the- shelf, due to the MarketsPulse Enterprise Solution which gives companies a cost effective in- house feel. Brokers have an open API, full integration with their current systems, customization, ability to distribute white labels, and more with our Enterprise Solution. Our company is solely focused on the technology and does not compete with clients by providing white labels. Our technology gives brokers the best of both worlds by offering full control of their business without having to invest time and money to develop in- house and benefit as our clients, such as FXTrade Financial, Ava, Hantec, Binary Products (provides a label to Alpari Russia) and more, are today."

Yoni Avital, CEO of Tradesmarter, added further aspects to consider: "Brands should look for the most profitable platform, one that is able to absorb a large level of transactions and traffic at any given time with Risk Management and Scalability as a key focus. Successful brands within the market will have to be provided with a truly scalable and adaptable platform in order to handle and accept a large number of user requests at any time. TradeSmarter platforms are built with this in mind, making them the ultimate solution for a growing and successful White Label brand," said Mr. Avital.

Mr. Avital considers an important part of Tradesmarter's reputation to be based on the innovative technology behind its trading platform and back office system which allows Brands to maximize retention of new and existing leads, focusing on thier best performed affiliation marketing channels, increasing revenues and of course, to maximize the life time value of each active client.

"With this said I suggest brokers invest their time and efforts into choosing a platform provider that best suits their needs rather than developing an in house platform," is Mr. Hamama's conclusion.

Currently, in-house binary options platforms are in their relative infancy, compared to the highly established software providers which supply the brands, however, there are certainly companies which are seeing fit to go to the extent of developing them. A point of interest will be whether a turning point comes within binary options, as it did within retail FX, giving rise to open solutions as an alternative to the established offerings. Indeed, time will tell.