One year after the Swiss National Bank (SNB) sent shockwaves through the global marketplace with its abrupt removal of the EUR/CHF floor, the ripples are still being felt across the FX industry. Prime brokers (PBs), prime of prime (PoP) brokers and retail brokers alike have spent the last 12 months reevaluating both their definitions of risk and their policies for extending credit to clients.
There is no doubt that the credit market in FX has changed drastically since SNB. For those brokers which were able to maintain a Tier 1 PB relationship, Net Open Position (NOP) limits have been cut significantly. The less fortunate firms who were unable to maintain their direct PB have been forced to explore a highly disrupted Prime of Prime space, where the effects of margin rate cuts are being felt both in credit lines and spreads.
For well capitalized firms looking to take advantage of this market gap, compliance limitations and a stringent demand for pre-trade risk facilities have delayed time-to-market.
pre-trade credit controls are no longer a nice-to-have feature for prime brokers extending credit into the Retail FX space
During the Finance Magnates London conference in 2015, oneZero Financial CEO Andrew Ralich addressed this concern directly, pointing out during his workshop on FX connectivity and technology that “pre-trade credit controls are no longer a nice-to-have feature for prime brokers extending credit into the Retail FX space.”
For the many firms interested in launching B2B offerings targeting the retail FX space, the options for a cost-effective pre-trade risk, Liquidity management and aggregation engine, with the capability to handle the demands of retail FX platforms and order flow, were few and far between. oneZero’s Hub technology, released in the third quarter of 2014, was one of the first demonstrations of a retail-focused technology evolving into the institutional connectivity marketplace.
Brokers who have deployed oneZero’s Hub solution have benefited from the ability to centralize order flow across multiple retail platforms, manage liquidity from a single point in their infrastructure, and consolidate their reporting, risk controls and integration points for LPs.
the ability to consolidate $/million fees into a single technology solution has become a key decision factor in selecting connectivity solutions
Extending this model, oneZero has today announced its “B2B Margin Module”, which allows brokers utilizing the oneZero Hub to extend credit on a margin basis via FIX to API traders and other brokers. This module includes a configurable per-symbol margin engine, an integrated cash ledger and real-time pre-trade risk checking.
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This is a first for the FX technology space: the oneZero Hub solution now combines three components for competing as a retail-facing and B2B clearing counterparty in the FX space: FIX Pre-Trade Margin/Cash Ledger, OMS/Aggregation Functionality, Scalable Bridging into Retail Platforms like MT4/cTrader/etc.
Many of the legacy aggregation platforms that include margin facilities lack the ability to reliably connect into MT4. Similarly, most off-the-shelf credit engines lack the robust order routing and connectivity functionality of a traditional Bridge or aggregation solution. In a market where price compression is occurring at every level of the value chain, the ability to consolidate $/million fees into a single technology solution has become a key decision factor in selecting connectivity solutions.
The rollout of this new technology means that brokers utilizing oneZero's solutions are now able to extend the liquidity pool utilized for their own internal business as a B2B offering without requiring their omnibus clients to track positions through a limited retail front-end or an expensive external back-office solution.
In addition, oneZero’s support for multiple asset classes allows these brokers to offer combined FX/CFD liquidity under a single deposit account, another key concern in a market where capital allocation strategy has become a primary day-to-day pain point for brokers.
