Minimising broker risks with Trade Processor
Author: Alexey Kutsenko
When you work in finance, searching for new and better risk management strategies never stops. Brokers are working with other people’s money in a highly competitive and high-speed environment, so there is naturally always something you can improve and enhance.
Yet you don’t necessarily have to look for complex or costly solutions to upgrade your risk management game. Often, a lot can be done with what you already have.
Today we will share with you the functionality in the Trade Processor liquidity bridge that is available to all clients.
The first thing we will discuss today is using backups to ensure uninterrupted service availability during the trading process.
Backups are boring, and we often don’t want to think about them, assuming everything will be fine either way. Yet once disaster strikes, the consequences of not having a plan B are much more devastating than they would have been otherwise.
So what does the backup LP mean? As you set up the trading and execution process, you assign the primary liquidity provider (LP) that the order will be processed through. And if, for some reason, the primary LP is non-responsive, the order would fail to execute. To prevent this from happening, brokers can add a backup LP that the system will switch to in case something happens to the primary one.
With the backup LP, there will be no downtime or other negative consequences caused by the primary LP’s failure.
Automating volume consolidation is another thing you can do right in the bridge to minimise your risks.
At the end of the day, all open positions across all LPs that you’re working with should be consolidated. If that is not done, swap costs and exposure will spiral out of control, creating financial loss. With the Volume Consolidation tool, you can automate the entire process, save yourself time at the end of the day, and minimise risk.
Relying on one trading platform has become too risky. As 2022 has shown us, brokers who don’t diversify put too much pressure on a single platform to support their business.
Trade Processor supports multiplatform trading: MetaTrader 4 and 5, cTrader, Match-Trader, and ACT-Trader. This allows brokers to follow the classic rule of not putting all eggs in one basket.
Reviewing and analysing data is the best way to stay on top of trends, make the most of the situation, and ensure that your company complies with local regulations.
Working with data doesn’t seem very exciting, but it can be easy and efficient. Trade Processor includes basic reporting on the trading process and presents data in a straightforward way, so anyone can understand it. It also contains all the data that brokers need to provide to regulators, and it can be exported in the format that is compatible with the reporting requirements.
There are two ways of approaching risk management. You can do it either reactively (when something bad has already happened) or proactively (preventing a risk from happening). Monitoring the environment regularly allows brokers to be one step ahead and reduce the potential consequences that they would have otherwise missed.
Tip: TFB and Map FinTech have recently partnered to make reporting even easier. Through the integrations, data will be extracted from Trade Processor and imported into Map FinTech’s reporting solution to create regulatory reports of all kinds for brokers. You can read more about the partnership in the company’s news.
Risk management is not a destination, it’s a journey. The world is ever-changing which means that we need to stay alert at all times. The tools we talked about today will give you an idea where to start, but the liquidity bridge has many more risk management features to offer. If you’d like to learn more about Trade Processor or get a free trial, please reach out to us at email@example.com.
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