How technology is changing the relationship between brokers and traders

Author: Baiana Kashaeva

Technology has long influenced and advanced the relationship between businesses and their clients. In the trading world, perhaps the most significant change happened when automation dramatically reduced the need for communication between brokers and traders.

Unlike in the past, there is no need now to phone your representative at the brokerage to buy or sell something. Traders can now log into their accounts and do everything themselves. And if they require assisted trading, it can also be provided through automation to ensure minimal involvement is needed from their end.

As the personal relationship with the broker started to become less and less critical, something had to replace it. That’s when many brokers went down the price dumping route and focused on winning clients with the best pricing possible, which was achieved largely through investments in the latest robust technology and cutting down their margins. Naturally, such an approach soon proved unsustainable for most market players. What we saw after that was a return to relationship building through offering advanced risk management strategies and tools.

To this day, protection and risk management remain a top priority in marketing campaigns for many brokers across the globe. With the increase in the variety of solutions, brokers took over the responsibility for many of their traders’ investment activities. Tools for Brokers, for example, offers a wide selection of risk management tools that brokerages can use, such as the StopOut plugin for high volatility periods or Negative Balance Protection that returns the trader’s balance to zero.

As regulation laws continue to develop, some of the risk management solutions have become a mandatory requirement to protect trader funds. Still, technology remains a few steps ahead, providing the means to do extra for traders and use it in promotional campaigns and positioning.

A more recent disruption, weekend trading, has redefined the rules once again. The technical ability to offer trading outside of standard market hours has been in response to a long-identified demand from traders. This was further boosted during the pandemic when many new market players joined the trading world looking for extra cash or a new source of income as a replacement for lost jobs. And although it meant more work for the brokers, the ones offering new services have seen a spike in interest, loyalty, and volume growth.

As the new trends and dynamics emerge, social media remains a hotspot for learning about brokers and making trading more accessible. The traders who otherwise wouldn’t have known about competing brokerages now receive ads and see promoted posts encouraging them to try out the alternatives. This is bad news for giants who used to benefit from traditional gatekeeping but good news for smaller brokers who have many more opportunities to win their fair share of the business.