For the last couple of years, there’s been a turmoil on the retail FX market. As the big names are consolidating in Europe and the U.S., new brokers are emerging from the Middle East and Asia. Following the shifts in the market landscape, technology providers are also changing their offerings. Many of them promote new large-scale products that are designed to fulfill multiple purposes at once or provide control over several parts of a broker’s platform: STP bridge, dealing engine, back office, website, CRM, and others. Such products are also known as “fully integrated solutions.” The idea is great and the features are appealing, but are these products as good as they look on paper?
How It All Began
The concept of deep integration through various components has been around for a while, but it skyrocketed with the boom of smartphones and gadgets. Having access to the everyday functions of personal computers in your pocket made them invaluable in everyday life. As the software behind gadgets got more advanced, it also allowed interconnection between different applications so you could get the benefits of using them at the same time.
Since then, technology giants Apple and Google have delivered alternative visions of the whole software environment. While Apple thinks about everything from A to Z, Android has a slower, do-it-yourself approach. If you’re using Apple, then the developers have already chosen an application which carries a certain goal. In contrast, Android users can choose from a variety of options to fit their setup.
Inspired by the accomplishments of the industry leaders, brokerage software providers decided to replicate the concepts in their own products.
The Flying Start
As the brokerage businesses expanded, the overall complexity of their systems increased. Each new service, tradable asset, platform, liquidity provider, branch in a different regulation—everything—has to be planned and considered from a technology point of view. That’s where fully integrated solutions came in handy. Nowadays there are products on the market that allow you to control A/B book execution in one interface, aggregate liquidity from several providers on your own MT4 server, and manage your clients within a single CRM integrated with your brokerage website and sales tools. This allows the broker to reduce staff expenses and automate the routine work. For startup brokers, there are one-stop-shop offers, when one provider will handle everything from license to website and liquidity.
Yet with all advantages lying on the surface, some brokers prefer a more conservative, hands-on approach. Why is that?
The Pros and Cons of Fully Integrated Solutions
| PROS | СONS |
|---|---|
| Unified control panel | Complicated architecture and configuration |
| Routing of execution flow | Reduced stability and speed |
| Extensive list of features | Higher purchase and upkeep cost |
| Incorporation of best practices from provider | Inability to replace the components on the go |
| Ties broker to a single technology provider |
The Pitfalls
One of the main concepts in software development is that the stability of the whole system is inversely proportional to the number of components. The simpler you make the product, the more stably it will perform. This basic rule applies to fully integrated solutions in the best way possible. Most of these solutions consist of several components, and some of them are installed on multiple servers. This brings numerous questions into consideration: overall speed, compatibility, connection issues. Some parts can only be managed by a technology provider, which means that the brokerage does not have full control over its platform. Moreover, maintenance and upkeep of such solutions is much more difficult and costly.
Imagine a situation when the broker bought a set of integrated products from one provider, like trader room + CRM + back office. Everything looked good until his regulator introduced new policy or reporting. All of a sudden, one of the components has to be replaced and there’s no quick solution because the provider did not think through the standalone compatibility of each component. It only worked when everything was provided by one company.
Better Safe Than Sorry
It is often said in the technology market: “Do not reinvent the wheel.” The providers who rely on this point consider their fully integrated products as the “Next Big Thing” in FX technology, but remember that one size does not fit all. Before making a decision, consider how flexible a particular product is, how scalable it is to perform one year from now, and how it will behave when the unexpected happens. These questions will eventually help you to define your own understanding of your needs and help you to improve your business.
Posted by Katya Yun
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