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FxPro Celebrates One Year as a NDD Forex Broker

It has been a year since FxPro said bye-bye to market making and switched to agency model (time flies, doesn't it!). Twelve months later, the broker looks back and shares with us its experience and evaluates its decision.

 

 

Switching to an agency model: the reasons

 

When we first heard about FxPro moving on to a No-Dealing-Desk (NDD) model, we figured the reason for that was improving the company's image and increasing its credibility – and as it turns out, we were right. The broker points out the four main reasons about its decision, and all these reasons ultimately lead to helping the company establish itself as a market leader. 
 
The first and foremost driving power behind the transition was the conflict of interest with the traders, that the broker wanted to avoid. As you probably know, market makers trade directly against their clients, whereas NDD/ STP/ ECN brokers act as mediators, making money by charging a commission on every trade or adding a markup to the spread. This way, the broker doesn't care whether the traders win or lose, as it collects the same commission/markup for the transaction – and this has lead the general public to perceive them as more honest than market makers. 
 
Another reason for FxPro to change its business model was its goal to improve trading conditions. The broker established co-operation with a number of respected liquidity providers, ten of the world's biggest banks, so that it can offer tighter spreads. As FxPro shares, establishing the perfect liquidity pool proved to be quite challenging, but the broker managed to do it – and its growth during this past year is a proof of that. 
 
Regulatory requirements also played a role in FxPro's transformation – the agency model has proven to be more transparent, therefore more favorable in terms of regulatory compliance. 
 
The last factor for the broker to leave its market making days behind was, as FxPro calls it, “simple business sense”. The company decided to focus on building a sustainable business model and on its execution efficiency, rather than spending enormous amount of time and effort on risk management and market volatility – something that every market maker does. 
 
 
 

The technological goals

 

Technology-wise, there were a few things the broker wanted to accomplish, the first one being reducing latency as much as possible, achieving levels of milliseconds, and virtually eliminating slippage. Furthermore, a system was set in place for keeping all pending orders on FxPro's servers until triggered – which is particularly useful during news releases and high market volatility (at such times, market makers delay orders for a few seconds and traders suffer losses due to slippage). 
 
Obviously, the transition wasn't challenge-less for FxPro, however the company did its best that it went as flawlessly as possible for its customers. Apparently, the transition of the business model led to a change in the broker's customer base: the new model began to attract traders who were looking for a long-lasting, reliable relationship with their broker, rather than jumping from one brokerage to another in search of the best offer. What is more, with its NDD execution model, FxPro was finally able to welcome traders who employed trading strategies, which market makers frown upon: robot traders, scalpers, etc. 
 
 
 

The results: Ca-ching! 

 

And all this paid out. As FxPro's shares, client profitability improved significantly for the last year, and traders using expert advisors (EAs) were the ones who achieved the greatest success. To enable them further, the broker introduced Quant – a drag-and-drop strategy builder that lets even those without programming skills develop and test their strategies. For the traders who prefer the cTrader ECN platform, the broker supports the cAlgo auto-trading platform.
 
 
 

The future

 

With all this that FxPro has achieved for this past year, we're eager to ask what's next – and the broker promptly answers: 
 
“The coming year is also likely to see further change in the industry. The recent crisis in Cyprus will be a factor for some smaller firms based in the country. We have always valued the security of our clients’ funds, protecting them within segregated accounts at global investment grade banks. We also gained a full FSA (now FCA) license for our UK operations as a way of offering further peace of mind to our clients. More brokers are likely to contemplate a change to an agency model of order execution, as the industry moves towards viewing this as the norm, aided by education, technology and most likely nudged there by potential regulatory changes”. 
 
With this said, there's nothing left for us except for pat FxPro on the shoulder and congratulate it on a job well done. 
TAGS: forex broker  forex trading  FxPro  forex regulation  forex platform  forex  NDD  market maker 

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