Forex brokerage firms service retail clients began to emerge in force in the year 1999. The foreign exchange interbank market existed, however, for many decades prior. Retail brokers channel the trading interest of an estimated 5-6 million Forex retail traders worldwide.
Worldwide, Forex Datasource estimates that there are approximately 100 Forex broker dealers that have more than 1000 clients each. To get a sense of how much trading volume passes through the hands of Forex brokers, it is useful to look at statistics from the largest broker in the market, Forex Capital Markets (FXCM). As of Jan 2009, FXCM claims to have more than 125,000 accounts trading its platforms. Also according to official sources, the FXCM monthly trading volume is $0.5 trillion as a reference, the foreign exchange volume that normally trades per day in the interbank market is US$ 3.2 trillion.
What a broker needs to start doing business
Before a Forex brokers opens the door for business, they have invested time and money to prepare the back office that will allow them to offer electronic trading of currencies to retail traders. The elements that they must have are: a trading platform, a sophisticated back office system, and a bridge interface to interact with participants in the interbank currency market.
The trading platform is what the retail trader experiences when they see charts, news, prices, and quotes. All of this information comes from the broker back office systems: price engine, trade servers, account servers, web servers, news servers, etc. The trading platform integrates all of this information in a format that, hopefully, is user-friendly and intuitive. Both the platform and the back office are part of the same system.
If a broker offers more than one platform, they have added complexity because they had to have one more element (not pictured in the diagram above): a front-end bridge interface between the new platform and the existing back office systems. On a side note, the more platforms a broker offers, the more complex will be to manage currency risk, keep the systems synchronized, and maintain systems uptime.
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