Risk management is arguably the most important part of running a successful e•FX business. Without it, businesses are playing a huge gamble on their very survival – as the SNB crisis proved with the collapse of several firms. Another common consequence of bad or non-existent risk management is the unnecessary loss of that comes directly from trades and results in a constant stream of money effectively flying out of the window, again putting the business in a perilous position. Traders can do this in one of two ways. The first is by arbing the system; a technique used by traders whereby they are aware that rates being displayed are incorrect due to stale pricing, but deliberately and consistently trade on it anyway.
The second method is by not dealing in full. This is achieved by traders who attempt to ‘trick’ their broker by repeatedly trading very small amounts rather than opening one large trade with the full amount. This allows them to maximise on tighter spreads, and can result in enormous costs for the broker if they go unnoticed.
One of our own clients originally approached us by describing the issues they were experiencing with risk management, and the difficulty they had with spotting traders Who were arbing the system or not dealing in full. Monitoring trades for these was becoming extremely time consuming and costly for them, and the system they had in place was inefficient and ineffective.
A key feature of MFX Compass is it’s ability to manage risk and reduce all of the costs associated with it. With regards to clients rot dealing in full, MFX Compass will control how and when the trade is made, This means that it will be at the top of the book, and adjust the price accordingly for any proceeding trades.
MFX Compass also has the ability to bind the risk of the entire system, preventing the worst from happening.
Keen to find out more about how MFX Compass can help improve your e-FX business and improve your profits? Simply call or email us and we’ll be happy to help:
T: +44 (0)203 397 1825