Anonymous

Speakers Corner Stop attacking B Book brokerages...it’s boring!

ANONYMOUS

The past few months I have become increasingly bored of a tedious debate that has arisen forming the simplistic narrative of ‘A book good B Book bad’. I have seen this come from the FX media (who should know better) and some brokerages focusing their marketing campaign as a stick to beat others within the industry.

Let me begin by giving a little bit of my background, I have been a CEO at the same brand for the past 6 years, where we have gone from a start up to a mature brand, making very respectable revenues along the way and establishing our name. We have always adhered to following all regulations we are under, and have always prided ourselves on giving our clients a great service.

We could not have grown without having a B Book license. Moreover, I think it’s fair to say that there is a huge difference between legitimate internalising and bucket shops. The two are often conflated as the same, which they are not. I often find it is a red flag in anyone’s understanding of the industry, or they are trying to get a needless cheap shot in when they claim they are one and the same. If they are looking to go into the murky waters of discussing the credibility of one brand compared to another based solely upon this, then I would suggest they are going down a very short term solution which will never get them the mass appeal they crave. Looking at the brokerage industry, it is only a very small vocal group of retail brokerages that operate a 100% STP operation.

I am guessing most of you who read this are involved in FX in some way, or the financial industry. We can all come to a fair assumption that nothing in the financial industry is clean.If you have ever had the misfortune of dealing with banks like I have for FX and other products, they make even the greyest of FX brands look opaque. Take a look at the huge fines that they receive for mis-selling along with other various crimes and misdemeanors.

Based upon my observations, the overwhelming majority of brokerages that claim to operate an STP model, either have a rebate deal with their liquidity provider, or have an offshore entity where they are just like the rest of us internalising. So if they are open to it, let’s take a look at how they make their money and we can discuss transparency.

Moreover, on a daily basis I am pitched by technology providers who tell me their cutting edge

technology can use AI, or whatever the latest buzz word is, to predict the probability of a clients trading style. This can be classified as the percentage chance of them winning or losing. Surely, if there is a continual critique going on about our tainted business model, surely they should also go after our enablers also to keep things nice and fair.

Further to this, let’s look at the cold hard economics of being a start up. If you had 100% A book flow from the start and no rebate from your liquidity provider executing about 5 yards a month which is pretty much unheard of at the beginning, you would make around 200k USD based upon spreads, commissions, etc.

To generate 5 yards, that would be in the region of 3.5 - 5M USD in deposits coming in. If we use very conservative data to assume that 80% of people lose their money, how do you explain to your shareholders that they made a massively inferior amount being STP, but don’t worry they can sleep easy at night as they are one of the ‘good guys’.

Furthermore, you only have one offer to go to your retail clients with which you are STP. You cannot offer what the vast majority of the retail market wants, the ability to have higher leverage and other enticements. Moreover, all they want is nice easy ways to transfer money and get their money back asap. They do say they want fast execution, however does a 500 USD client even understand what that is? How else do you expect us to make money?

We have revolutionised marketing with our money. The expo industry has boomed off our backs, moreover the media that has criticised us, takes our sponsorship money readily with no questions asked.

Finally, why should we make the LP’s rich? Surely in such an entrepreneurial market we should have access and have a slice of that as well. Maybe we can all aspire to become one in the future and make the market more transparent. Who knows?

I didn’t set out to write this and try to convert the STP owners who appear to be like religious zealots into followers of the B Book model. All I would like to do is offer our side of the story, and some form of balance to both the misinformed and the uninformed within the industry.

In essence why would a responsible CEO not have a B Book solution, the name of the game is to make money. FX is an industry where there are very few business ethics in relation to the way employees are treated, the LP’s treat their clients, the way that the sales people move their books, the way that technology is sold to you to maximise your clients ‘potential’.

The best metaphor I can give is that a brokerage CEO (rarely the owner) who only wants to do an A book only model as a startup is like an anti vaxxer. We all know the remedy is good for you, yet you protest on your deathbed (CEO getting fired) you know better until your final breath!

As workers in FX, the industry is sold to you like it is as exciting as working on a trading floor on Wall Street, sadly the reality is not this. We are in it to pay the bills, get on with our lives, and look to grow in other ways. Accept the industry for it for what it is…. or go and get a job in Greenpeace!

With regards to marketing and affiliation, we can offer them better deals. Give them the tools they want to bring in high quality traffic. There has been a lot of criticism of this model, however this is the way it has always been, and it will always be this way. If you think any retail brokerage is going to turn down affiliates and IB’s then you are incredibly delusional. Our websites have to be as attractive as any online store to get their attention, along with the technology they need to trade.