Wide pricing is a common issue that many brokers face, and is a huge pain point in the FX industry for all involved. This problem occurs when spreads widen around the roll, data figures or in fact at any random moment. Brokers have no control over the rate and the resulting effect is a lot of angry clients who have been unnecessarily stopped out of their trades, not to mention the uncertain risk brokers hold while they are unaware other their true exposures.
When a client of ours first approached us, they explained that they were facing this common problem. Time and time again, they were experiencing extreme fluctuations in pricing, with spreads going very wide. This, of course, led to their own clients getting unexpectedly stopped out, resulting in a lot of frustration for both parties. As a result of this exasperating issue, the client lost many of their traders.
During our on-boarding process, we conduct a detailed review of our client’s previous data. This is a significant stage that helps us to understand where improvements need to be made and how we can achieve this. Whilst reviewing this particular client’s data, our analytics team immediately saw the pricing issues they were having.
MFX Compass is easily capable of resolving this problem, using an in-built pricing node that we call ‘Wide Spread Suppression’. This advanced tool will enable indicative pricing, and will prevent a new price update from being released if the quote is greater than a specified multiple of the base spread set. Furthermore, no price update will be discharged – and therefore no clients will be stopped out – until spreads are back within the acceptable range. As previously mentioned, pricing will be indicative during this time and clients will be unable to trade. However, a reject is far preferable than clients being incorrectly stopped out, and spread spikes usually only last for a brief moment before returning to normal.
Thanks to the Wide Spread Suppression tool, our client has now been able to take control of their pricing. Their client retention has made a remarkable improvement during this time.
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