Why You Need to Reconsider Pricing in Your eFX Business
Although the phrase “variety is the very spice of life that gives it all its flavour,” is certainly something we can all agree on after the lack of variety in our lives this year, it’s not always ideal when it comes to pricing in FX.
Due to a considerable rise in liquidity provision and aggregation over the past few years, it’s become increasingly more challenging to know with certainty how accurate the rate you are showing to your customers is. A combination of heavily aggregated price feeds (with a dash of latency for good measure), tighter spreads in the market, volatile conditions, and an increase in machine-led trading has created the perfect conditions to leave brokers vulnerable to predatory attacks.
Investor Profiling
The devil is in the detail: scalpers who move in and out of positions quickly, taking money each time, need to be managed differently to investors who hold their positions over an extended period. So, filtering clients by their trade holding period is critical to quickly make decisions and act on them before it’s too late.
Volatile Conditions
Not all market makers are created equal; some price-makers simply do not react in the way they should. Therefore, it’s essential to evaluate what's going on amongst your pricing pool so you’re able to form a better idea of whose price is most accurate (or if it is a crisis). This will help you avoid the very troubling situation of LPs remaining bid when the rest of the market is offered, and you are doing the same. Without this knowledge, your business is left vulnerable to models explicitly created to snipe at these opportunities, causing unnecessary losses.
Expect the best, prepare for the worst, and capitalise on what comes.
Simply put, good rates attract more flow, while new clients provide more opportunity for cross sale. By preventing people from taking money from your business, you can earn a better $ per million per trade, which is crucial to the overall health of your business.
