Forex - MoneyShow.com

“Automation is key in revaluing customer
positions in a timely and accurate manner,”
notes Sean O’Donnell, Director of Technology
at Cognotec based in London. “As each
customer’s credit limit can be different - typically
with different leverage ratios - a slower revaluation
process means there is a risk that market price
movements may be missed, thereby leaving the bank
or broker with exposure from a customer’s position.”
There are also historical and technological reasons
why banks and brokers are facing a need for more
effective risk management of their Retail FX customer
positions. Traditionally bank systems were designed
for institutional clients. And, these clients normally
depend on their own reporting software to determine
outstanding risk and deal confirmation. “In the Retail
world, where a system such as FX Bridge’s ProTrader
Plus platform is best suited, the burden is shifted
to the broker,” states Joe Cunningham, President of
FXBridge. “This is why we’ve implemented a robust
and comprehensive reporting system. We simplify the
complexity of the information to make it easily
understandable by a less experienced client base.”
In addition, with a large number of Retail clients
under management, FX Bridge’s ability to
automatically manage client exposure and “auto-cut”
clients to prevent a negative equity position is critical.
Finally, the firm’s robust implementation of straight
through processing (STP), from reporting to
confirmation to risk management, is the “icing on the
cake” asserts Cunningham.
Risk management
Denis Borisovsky, CEO of leading platform provider,
PFSoft, based in the Ukraine, believes risk management
is and should be “the most important part” of a
brokerage business. “The most successful brokers we’ve
seen have very sophisticated risk management models,”
he says. “Usually they have extremely smart hedging
strategies, and in some cases are ready to take risks -
becoming accurate market makers.”
In order to minimise risks many brokers today are
connecting to more than one liquidity provider, in FX
as well as across other asset classes. Sometimes they
even create their own ECNs, which allows for fairly
complex rule-based risk management and price
aggregation. Consequently this requires agile risk
systems to be in place. Borisovsky adds: “Ideally risk
management depends on both the behaviour of a
particular customer and market conditions. Only by
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Denis Borisovsky
“Only by having flexible models in situ is a broker able to
provide the best conditions for their clients and with
sufficient risk management.”
having flexible models in situ is a broker able to
provide the best conditions for their clients and with
sufficient risk management.”
Plethora of available solutions
There are a host of companies providing margining
and real-time risk management technologies for Retail
FX trading activities. SS&C Technologies (SS&C), is
one which delivers investment and financial
management software. By virtue of its acquisition of
MarginMan, the firm now offers collateralised
trading software to many of the leading global players
in the FX marketplace. MarginMan fully supports
collateralised FX trading, precious metals trading and
over-the-counter FX options trading. In terms of
solutions catering specifically to the Retail end of the
market, there are plenty of products available, says
Peter Kelleher, Product Manager for MarginMan,
who deals solely with the margin trading business at
the firm. “However, by and large they [solution
providers] have typically just offered a very simple 5%
or 10% leverage calculation,” notes Kelleher. “And,
clients are seeking more information and on a realtime
basis, more aggressive netting and lower
calculations in terms of the margin requirement.”
The USP of MarginMan is that it is highly scalable,
rich in functionality and flexible in terms of the rules
in calculating client exposure. But this should hold
true for all robust FX risk management and
margining systems.
january 2010 e-FOREX | 103