When you create a brokerage firm, you are often faced with the challenge of picking up the instruments and assets you want to offer. In doing so, you can either focus on one asset class, like Forex, cryptocurrencies, or stocks or combine many of them in one platform.
But here’s the dilemma: the single-asset approach gives you room to provide the best services in, for example, Forex trading, while the diversified approach enables you to give something from everything.
While there is no right and wrong answer here, the decision is based on your expectations, budget, style, capacity, and financial goals, and the latest is easier to predict: making as much profit as possible!
However, there are different risks that you must consider with each approach. For example, if you don’t have a large team, the multi-asset brokerage can be hectic, while the one-asset focus can expose you to significant market dangers.
Single-Asset: Focused Approach
Focusing on one asset or market isn’t a bad idea at all, especially if it’s your first foray into the financial markets and you want to test the waters.
Many users who want to buy their first Bitcoin head to an exchange platform that offers only crypto services. The same applies if someone wants to acquire some stocks or trade gold.
This way, you can dedicate all your resources, development efforts, and innovation to providing the best stock trading experience or the lowest gold trading fees.
However, it is fair to say that the risks outweigh the rewards here. If gold prices plummet and everybody is selling, it’s not good news for you! This can magnify in speculative and volatile markets like cryptocurrencies.
That’s how Three Arrows Capital collapsed. High volatility depegged the UST stablecoin, leading to LUNA’s infamous downfall. Other risks, including regulatory changes, investors’ confidence, and the rise of other markets, can significantly shake your single-asset brokerage platform.
Multi-Asset: Risk Diversification
We can shorten this approach to the famous saying, “Don’t Put All your Eggs in One Basket,” but what about the costs of handling each basket?
Diversifying your risk is a real thing, and by offering different asset classes, you can benefit from the rise and fall of financial markets without seeing traders leaving your platform.
Users can switch their trades and markets within your platform without affecting your brokerage turnover and suffering from default risks. The challenge here is that you need to have a team of developers, brokers, marketers, and support agents for each market category.
You also need to ensure legal compliance with each regulatory update in every asset class, which requires significant investment and attention.
However, the fact that you can attract more customers, including professional investors and multi-asset investors, to your side can significantly boost your financials. Therefore, risk diversification is applicable and recommended for traders and brokers alike.
Best Practices for Brokers
Does that mean that newly starting brokers can’t adopt a multi-asset approach? No. Thanks to technology! Today’s trading platforms allow brokers to establish and manage their portfolios with less fuss.
That’s how white-label multi-asset and multi-market trading platforms are created. Businesses can use a brokerage system that facilitates multi-asset, multi-market trading without having to deal with the development and technical side of things.
Turnkey services integrate trading software, back-office CRMs, liquidity connections, margin trading capabilities, dynamic leverage, and more, provided and maintained by the provider.
This approach enables brokers to offer multi-asset, multi-market trading opportunities on crypto spot, crypto derivatives, Forex, CFDs, and more from the same platform.
One good example of such a platform is B2TRADER. Rather than juggling various platforms for each business model, it offers a centralized system where brokers can support multiple markets and assets and diversify their risks at low costs while traders choose the number of markets they want to invest in.
This comprehensive model does not compromise user experience or trading quality since it back-links the brokers with top liquidity providers, excellent engine performance, and flexible cross-margin collateral management to drive attention based on market conditions.
The white-label multi-asset, multi-market approach powers new startups or established brokers to launch and boost their brokerage services more effectively while allowing traders to switch between one or multiple financial market investments.
