Coordinated retail trading: how to prepare your brokerage

Author: Albina Zhdanova

One of the surprising outcomes of the pandemic is the rise of retail investing. It was only a matter of time before people understood what kind of impact they might have, should they coordinate their trading strategies.

In today’s article, we will not debate the ethics behind this phenomenon. Instead, we will focus on giving you actionable tips that will help you prepare your brokerage for such events and manage them in the safest and most efficient way for everyone.

Tip 1. Use real-time monitoring and alerts

We are firm believers in data monitoring and management. You would be surprised how many disasters that happen to companies and end up in the news could have easily been prevented with proactive monitoring. And brokerages are no different. There is no way to influence what is happening globally, but if we notice abnormalities quickly, we can react better and avoid any damage.

Use flexible trading alerts to configure the thresholds for your individual scenarios (e.g. odd trading behaviours) and check economic calendars regularly to see what is happening globally. Run ad-hoc reports to see your company’s performance. The more information you have, the better your decision-making process will be.

Tip 2. Review your A/B-book strategies and LP coverage

If you are in a region where both A-book and B-book are allowed, check your current processes and strategies. Which clients go to A-book and which go to B-book? Why? Make sure you know your clients well and can accurately predict their trading patterns.

Depending on your liquidity bridge software, you might also be able to pre-configure the rules to trigger an automatic switch from A- to B-book and vice versa. Some LPs might have more liquidity for trending instruments than the others, and you want your traders’ orders to be accepted and executed.

Tip 3. Implement additional trader protection tools

The GameStop situation enabled many traders to earn a lot of money. But some people lost their money. As a responsible broker, you want to protect your traders from significant losses and damage. Many plugins on the market restrict losses for a group or a certain account and not allow traders to be exposed to higher risk.

Ultimately, the best tip we can give you is to always keep an eye on what’s in the news and what your traders are doing. If you are unsure where to start, try the Brokerage Business Intelligence (BBI) software that is a part of the TFB ecosystem. BBI includes fully customisable alerts, a real-time calendar for global economic events, and various reports that you can customise for your brokerage. Email us at sales@t4b.com to find out more about TFB solutions that can help you protect your brokerage from coordinated retail trading.