The Cutting Edge: Advances in Trading Technology—FMLS 2022
Jon Light, Devexperts’ Head of OTC Product, took part in panel “Cutting Edge: Advances in Trading Technology” at the Finance Magnates London Summit 2022.
The speakers discussed CFD brokers’ challenges regarding platform customization, scalability, and cost-effectiveness. They also talked about how important mobile platforms are for attracting new traders and how challenging it is to find a USP in a monopolized marketplace. Finally, they provided their outlook for crypto trading in 2023.
Q: Our first topic is about the biggest pain points brokers face, especially in the current volatile market. Jon, I wanted to ask you about the recent events in the industry—I feel that a lot of brokers are becoming more multi-platform than mono-platform. Would you also see that as a pain point, or is this just a trend?
A: Yeah, I’d say it’s a pain point, but all brokers are obviously different, so it’s quite hard to generalize for all of them. I would say the biggest pain point, when you boil it down, is the ability for brokers to be flexible without incurring high costs.
So, we speak to a lot of startup brokers, and obviously, for them, the most important thing is to get up and running really quickly. They don’t want to spend time signing up with loads of different vendors and integrating with so many different platforms. Every day they’re not operational, they’re losing money. So lots of those brokerss go sign up with white-label providers or providers that give you everything right out of the box. But later down the line, it’s hard for them because they’re locked into using that vendor. It’s hard for them to move away from different platforms and things like this.
And this goes all the way through to established brokers. Established brokers have exactly the same problem. They don’t know what their business model is going to be in five years. They don’t know if their platform is going to be able to support that. We speak to a lot of established retail brokers that want to move into the institutional space and have a B2B offering, and it’s very difficult for them to do that on a retail platform. It works in completely different ways. So, they only have two options. They can either customize their existing platform, which they might not be able to do. Or they can go and buy a second platform to sit alongside their current one, which obviously incurs lots of costs and uses up valuable resources. They need to manage risk in two different places. They’re not going to get the efficiencies of netting and things like that. I’d say the flexibility without incurring costs, and the recent issues that you alluded to with regard to MQ, are just some of those pain points.
Mobile is one of the most important ways to attract new traders. You want to attract the new generation, and you want to go into new markets, like Africa or South America. You have to have a good mobile platform that’s native and works well on mobile. And this is just one option. In other words, you need to have a platform that can work with your business models and be flexible in the future, rather than a platform that dictates what business models you have to end up working on.
Q: If you’re looking at different business models—some prefer aggregating, others market-making. Obviously, some companies can offer a solution out-of-the-box for both types of business models. How is it possible for the brokers to retain a USP if the companies they’re using are the same, which means they have the same set of tools to use?
A: Having a USP in a marketplace where everyone is pretty much on the same platform, or the same few platforms, is very difficult. And I’d say there are two different ways you can really make your offering unique.
The first is to have a platform that you can customize, maybe through a vendor, or by bringing it in-house. And the second option is to have a platform that is elevated with API plugins that allow you to bring different third parties together to make it your own. And both options have pros and cons. Obviously, if you customize it and build it yourself, you’re going to get exactly what you want. You’re going to have your business model as you want it, and you’re going to be able to handle your volumes. But it’s going to cost you. Not many brokers can afford to pay for their own teams. So maybe they can pay for a base platform and share some of that customization. And then, obviously, with the APIs, you can plug in hundreds of different vendors. You can bring in your portals, and your CRM, and you can really make it your own. But you’re going to be limited by what’s supported on those APIs and what’s supported on the front end. So it’s possible you aren’t going to have a fantastic, seamless integration on an app or something similar.
And obviously, the best solution is a mixture of both. So being able to bring in third parties for things like CRMs and portals, where you don’t build it from scratch every time. But then also being able to customize where you need to. Our platform, for example, supports retail FX brokers and institutional FX brokers through to crypto exchanges. We’re even going live now with a CFTC-regulated CEF in the US for complex options strategies. And this is all built on the same platform. We’ve integrated APIs throughout the whole platform. People can do anything on the platform if they build it themselves. But we also have over 800 engineers and can run custom projects. And when a broker gets large, we can even sell them the source code so they can take it in-house.
Q: I know you do a lot in the crypto space. Is that the emerging trend, you would say, for 2023?
A: We certainly see a lot of interesting things in the crypto space, because nowadays, it’s too risky for brokers just to have a single asset offering, and lots of clients come to sign up just because they have crypto. Brokers might not actually make much money out of crypto, but then they can cross-sell into other areas. I’d say the trends coming over the next couple of years are that we’re not going to see the large volumes of crypto trading that we’ve seen over 2020 and 2021, as traders are going to have less disposable income.
I think the way brokers will work will probably won’t be full of innovation. It’s going to be about minimizing your risk and cost, or maximizing your profits. With minimizing risks, brokers might add asset classes to ensure they’re not losing clients, and maybe add another platform so they have at least two. You can have a reliable mobile platform, for example. And then reducing costs. We’re seeing lots of brokers interested in our AI support bot, which can answer 80% of the queries that come through, because having large call centers is expensive. If you can answer 80% with a support bot, keep on learning when you’re answering them, and then send 20% of the queries through to a person, you can reduce costs quite well.