Retail FX Brokers can optimize their market-making revenue in a far better way than just A book/B book. Five to ten times the P/L of an A book can be captured without taking the risk of a B Book. Holding inventory risk for minutes as opposed to hours or days significantly lowers P/L variability.
PriceOn™ empowers dealers to maintain control by providing evolved capability to scale up their business and increase competitiveness. Dealers have access to a broad feature set meant for several specific use cases.
- Separate by client, currency pair, size of trade, and time of day.
- Implement hybrid strategies beyond A and B book that maximize P&L often missed by A book hedges while not taking the risk of B booking.
- Customize tailored feeds to increase your client base and win business lost to larger, more competitive players.
- Reduce reliance on outside counterparties. These often one-way relationships can sometimes be fragile and sensitive.
- Minimize hedging costs by placing passive bids and offers, driven from inventory to the market, capturing spread and becoming a valued firm skewed price market maker.
- Increase trade yield by optimizing time to hedge each type of flow and implement strategies to maximize and capture spreads earned from this activity.
- Use toxic flow to your advantage – passive bids and offers, driven from your inventory, can price flow once deemed unprofitable.
- Opportunistic one-sided market making (or heavy skew) for prop trading P&L or execution of large customer orders.
To learn more, reach out to my sale team at sales@tradertools.com, or directly to me at drewn@tradertools.com - The team and I are happy to describe this in better detail and discuss your flow and marketplace opportunities.
A book/B book segmentation is not the optimal setup for a large segment of Retail FX Brokers. When analyzing flow profitability, many firms mix income from overnight financing with the spreads that user cross with that of P/L generated by market movement. Capturing the spread allows the dealer to further segment P/L on trades and differentiate the “VIG” capture from the risk of a position.
Where are the biggest opportunities?
- Commonwealth currencies cross because of their relatively higher spreads. Spread capture plus rolls should amount to nearly 100% of the P/L that a typical B Book would capture with far higher consistency.
- Emerging Market currencies where there is often > USD300 per USD1million of value embedded in the spread alone. These currencies are typically attracting far more conservative leverage. Spread capture plus rolls results in a far higher revenue capture per trade than traditional B Book.
- One way commodity CFD instruments Metals (outside of gold), and Agricultural, do not lend themselves to B booking and trade on high spreads, therefore, A book gives away too much of the potential economics.
- Crypto CFDs, and especially unleveraged crypto spot, particularly outside of BTC and ETH, is ideal for traditional market-making spread capture and not B Booking.
PriceOn™ from TraderTools Inc. can customize an algorithmic solution to your flow, utilizing the same tools as a professional High-Frequency shop, enabling your dealers the ability to take back control of the process. We have in-house quants and analysts, ready to help customize the PriceOn™ just for you.
