Suppose you’re running a hedge fund, asset management firm or family office and regularly deal in FX. If that’s the case, you might be swayed into thinking that you need a professional, exclusive and most likely, an expensive platform to manage your positions. Perhaps that was true ten years ago. Today, however, that notion is about as close to reality as the idea of Amazon paying dividends to its shareholders.
It goes without saying, connectivity & execution quality and reporting capabilities are the two most important factors that influence any buying decision in your organisation. The Bloomberg terminal was the first platform to offer all of that as well as a plethora of tools, information and functionality for traders. The downside is the cost. When you pay thousands of dollars a month for each user in your company, it can quickly become a burden, especially when there are several far more cost-effective options out there. If you’re a hedge fund; what options do you have?
Building, or even just licensing, and then hosting your own trading engine is an ongoing overhead. There is the option of using the trading interface provided by your prime broker. However, these applications generally lack the tools that make the job of traders that little bit more comfortable. It’s especially tiresome if traders in your firm want to conduct price analysis, build indicators or watch price development throughout the day and have to use another application to submit orders, monitor exposure and manage positions.
What many hedge funds and professional trading firms overlook is the idea of using retail trading platforms. In 2020, retail FX platforms genuinely are a different beast, and they are progressing much more rapidly than their institutional counterparts.
Let’s face it; asset management platforms are notoriously dull. They always have been, and they always will. Retail trading platforms have come leaps and bounds in the last decade. Platforms like cTrader and to a lesser extent, MetaTrader 4 have been designed to be flexible. These systems are designed to be moulded and match the operations of hundreds of brokers worldwide. Retail platforms must be ready to operate in different jurisdictions with varying reporting obligations, synchronise with elaborate back-office procedures, plug into different liquidity price feeds and support a variety of asset classes. On top of all this, they must concurrently support hundreds of thousands of active traders.
To emphasise how truly relevant retail FX platforms are for hedge funds and asset management firms, we’ll explore what these systems have to offer in terms of execution, trade management, automation, information access and reporting.
Having access to great pricing is meaningless if your orders can’t get to the execution venue in time. Execution on MT4 can vary depending on the third-party bridge systems brokers use, how the platform is hosted and how crowded the trading environment is. We host our MT4 servers in LD4, alongside our bridge which is cross-connected to our LPs. cTrader is a cloud-hosted platform that is STP by design and connects with price providers and execution venues directly, meaning no bridge is required. Thanks to these initiatives, our clients can take full advantage of the tailormade price feeds we offer.
A lot of hedge funds claim they don’t need fancy software and say they are quite happy with chunky bid and ask buttons, an order book that makes you feel like your staring into a strobe light, unordered colour schemes where every feature fights for your eye’s attention and graphics that could have been stolen from Clip Art. If that’s how you feel, no one’s here to judge you.
Retail trading terminals don’t just come with charts. The platform developers have put a considerable amount of thought into user experience; this is especially true in the case of cTrader. Orders can be submitted in a variety of ways. Trade from the order book, click the bid and ask buttons or use the submission form. View all open positions and manage exposure inside uncluttered blotters. These platforms also keep detailed journals of every event that has taken place.
This is just a basic overview, in fact, there is much more a hedge fund can take advantage of when utilising a white label retail platform in conjunction with a premium liquidity provider. The benefits are tenfold when that combination is Scandinavian Capital Markets and cTrader.
Automated trading is undeniably one area where retail trading platforms have evolved incredibly. There is a vast ecosystem of automated trading bots and customised indicators. Although you wouldn’t see immediate value in these communities, the point here is that retail trading platforms focus on putting as much functionality as possible in their API’s to cater to this demand. Moreover, you can be highly certain that platforms like MT4, MT5 and cTrader have been stress tested by many thousands of developers who are building all kinds of weird and wonderful trading tools.
One of the features that fast-tracked the Bloomberg terminal to the market-dominating position in the institutional space was it’s idea-generation capabilities. The combination of information and communication features alongside trading functionality was what traders wanted. In recent years, we’ve seen retail platforms supporting economic calendars, news wires from Dow Jones (oh and Bloomberg) and even pattern recognition tools.
Reporting is a multifaceted obligation. You need to satisfy regulators and please your clients. Both parties want to see something slightly different from the reports you issue to them. Thankfully retail trading platforms are flexible by design. Brokerage firms like Scandinavian Capital Markets can develop plugins to fashion reports in nearly any format easily. When it comes to reporting return on investment and other key performance indicators to your clients, retail platforms are often equipped out of the box as traders are keen to monitor the performance of their trading strategies.
Retail trading platforms are far more sophisticated than you might have presumed. A significant factor of their flexibility is their need to cater to a broad demographic of users.
As you can see from the highlights above, when you combine a retail FX platform with a premier STP-ECN brokerage partner like Scandinavian Capital Markets, there is a 360-degree hedge fund white-label solution for trading FX at your fingertips. We’re positioned to deliver solutions for professional FX firms. We have incredibly experienced back-office and middle-office teams who can meet the demands of any regulated or authorised business regardless of jurisdiction that offers asset management or advisory services.
All-in-all, we offer three trading platforms which can be white labelled and plugged into customised liquidity feeds which are designed specifically for your needs. The platforms we offer are; cTrader, MT4 and Currenex. One final caveat, if you ever had a client or partner that wanted a self-trading account, it would be incredibly simple to offer.