Does a broker need liquidity?
Does it make sense to buy external forex or crypto liquidity when an internal liquidity model, or so-called B-book, already has a great track record? Some companies decided a long time ago to work strictly by the B-book, others stick to the A-book, while some monosystem partisans are gradually switching to a hybrid scheme. Which option is the best?
Forex or crypto Liquidity
Liquidity is the ability of a currency pair to be sold quickly at close to market prices. That is, liquidity translates into the saturation of supply and demand and the ability to execute trades quickly at the best prices. Liquidity can be internal and external. B-book means internal liquidity, and this liquidity is provided by the company itself or its clients. If a broker has many clients, their trades are mutually covered, and the broker just has to monitor the total sum. As a rule, each individual client does not affect it too much. If the broker acts as a counterparty, they have to pay on profitable trades themselves. This model is rather vulnerable for many reasons. A-book means external forex liquidity. It has high demand/supply characteristics and better prices, since orders are routed to external providers who have a large pool of traders and therefore a greater order execution capacity.
B-book, or internal forex liquidity: pros and cons
Many brokers mistakenly believe that B-book is the most profitable business model, as it provides maximum profit. The orders are never placed on the market, which means that all the money clients lose stays with the company. It sounds very attractive: someone will get that money anyway, why not keep it for yourself? On the one hand, all of it is true, but this model has one significant drawback. If a client earns money, the broker will have to pay it “out of their pocket”. And as we already know, brokers working with B-book offer very high leverage so that the payouts are significantly higher compared to the initial deposit amount. To avoid paying, the broker can dispute the trade and not pay the profit. They can also manipulate the prices to help the trader lose. It is a dirty job that quickly becomes obvious. In these cases, the broker loses its reputation and clients and may as well leave the market for good. That is why in-house crypto or forex liquidity is only suitable for big brokers who have a large order flow, their own wide internal market and enough funds to pay fairly on profitable trades. A small start-up can end up with big financial losses thanks to this model. If they decide to cheat, they can also lose their reputation and clients. Finally, this model has a significant disadvantage in that principal revenue earnings vary from month to month, depending on the market. That is, it may be 30 or 70%... of losses per month.
A-book, or external forex liquidity: pros and cons
A-book is an external liquidity model, i.e., the broker brings all the trades to the market and earns on spread and swaps. They get money from every trade made by the trader. Another advantage is that the broker does not care whether the transaction is profitable or not. They receive the same commission on each transaction. Consequently, the broker is not interested in playing against the trader. The most important thing for a broker in this situation is to increase the trading volume: the more trades are made, the more money they make. It is a classic win-win model with predictable profit and minimal reputational and financial risks. It is the safest choice for a first-time broker: you only pay for the volume, which makes the business manageable and cost-effective. At UpTrader, we also offer a volume-based CRM fee which allows you to start a company with literally a few thousand dollars in your pocket.
Hybrid model: A-book and B-book
Brokers are increasingly opting for a hybrid operations model. After all, from the point of view of financial markets, it is reasonable to keep traders with small deposits on B-book because their profitable deals will not cause the company much financial trouble while unprofitable ones will turn into income. If a client has a lot of funds, however, any of their profitable trades can exceed the broker’s financial capacity. In this case, it is better to transfer that trader to A-book. Alternatively, such clients can be partially transferred to A-book in order to reduce risk exposure.
The advantages of the hybrid model are obvious: first, competent account management allows the company to receive profit both from commissions and from losing trades without risking its own funds. The broker fulfills its obligations to clients, thereby earning loyalty and building reputation. It is important to understand, however, that clients generally do not care whether the trades are brought to the market or not. They pay much more attention to trading conditions and profit payments. If a broker does everything correctly, all parties win. The only downside is that you will need competent risk managers. There are some on the market, but they are usually either employed by other companies or quite expensive. Therefore, you have to choose the hybrid model responsibly.
If have any questions related to forex or crypto liquidity, or if you need liquidity, contact UpTrader team please using our registration form and we will give you the best offer.
The first basic version of the service for MT4 was launched in April 2021. The full version included a large number of functions which were added as the development and testing progressed. As of 2021, UpTrader Copy Trading Platform service was awarded by the prestigious Forex Rating Awards as the fastest-growing service on the market. Currently, the team has implemented all the functionality of the project architecture.
Now the Copy Trading Platform service from UpTrader includes:
1. CopyTrading for MT4 and MT5.
2. The possibility to choose a copy trading model: MAM, PAMM, or social trading platform.
3. The possibility to purchase the Copy Trading Platform as a plugin in the UpTrader CRM tool. You can also integrate it into your own CRM tool or terminal and customise the interface as you wish. UpTrader provides customers with API and full documentation so you can create your own interfaces.
4. A wide range of tools for investors and traders to flexibly manage risks and profits, such as rollovers, stop-losses, take-profits, the ability to disable strategies at any time, and many more.
5. The option to be installed as a native MetaTrader plugin which ensures precise trade processing.
6. Both A-book/B-book models and their variations. Any existing arrangement is available, including spreads and fees.
7. A competitive price — free integration, $1,000 per month.
You can find detailed information about this service on the UpTrader Copy Trading Platform page.
In addition to the obvious advantages, the service has several features that will allow your company to get more clients and managers to use the service:
1. Stability. No trades are lost thanks to its unique design. Unlike similar platforms, UpTrader Invest is a plugin that works directly at the MT4 core, ensuring the stability of operations and completely eliminating the possibility of missing trades, which is inevitable when connecting to MetaTrader 4 externally — and that is exactly how most similar solutions work.
2. Controlling your UpTrader Invest in MetaTrader Manager
Brokers can manage their UpTrader Invest plugins through the MetaTrader Manager mobile app. It offers full managing capabilities: opening new accounts, deposits, analytics, and much more.
3. Versatility. Investors can monitor their profits via all available methods for MetaTrader (desktop app, mobile app, web terminal) & via UpTrader Fx CRM
Learn more about the service on our UpTrader Invest page:
How does this service help you attract more clients and build audience loyalty?
Many novice brokers ask: Is there a simple service to easily increase sales? Yes, there is. One simple and popular way to activate a novice or hesitant audience is to offer them a copy trading platform with experienced traders.
Many traders who are new to the market are understandably concerned about the risk of losing their deposits and struggle to understand how to trade in general. A procrastinating client equals a lost client. Sometimes copy trading can help them take their first step. A clear rating system, transparent copy trading terms, risk limitation, and instant profit crediting to their account make the service attractive enough for a client to start earning with your company. The only problem to be solved is attracting traders to the service. Good trading conditions, user-friendly interface, and good rewards can help.
If you want to know more, click “Contact us” in the right corner.
It is now possible to log in to UpTrader Trader’s Room via Telegram messenger. Now each broker can set up this feature for their clients in a few clicks in the Admin interface.
“Telegram is known for its strong position regarding free speech protection. That is why it has become the most popular messenger in the crypto community. UpTrader’s clients live in different countries and for many of them free speech means a lot, so they prefer to use Telegram. In the latest months Telegram popularity has been growing among lager groups. In respect to that we have made convenient authorization in the UpTrader Forex CRM.” - commented CEO UpTrader Vasily Alexeev.
More questions left? Contact us [email protected]
The conflict between Russia and Ukraine revealed a global crisis of confidence and strained relations between countries. The US is talking to any opposition only to imply sanctions: "If you do not do as we say, we will impose sanctions against you, if you do as we say, we will lift the sanctions imposed on you earlier".
This rhetoric cannot help but anger world powers like China or Turkey, who see themselves as entitled to pursue their own policies. Markets react sensitively to each statement; country and sector indices, stocks, and currency are turbulent. While some are rising, others are falling. How does it affect the brokerage business?
Market turbulence and crises always attract investors. Some venture in to preserve their capital, others want to earn more money. In the last month, UpTrader saw an increase in the number of requests from companies in Asia which focus on trading gold and currency pairs. Gold is rising as a safe haven for investors during the storm. Others are looking at the energy sector, as Brent rose to $129.47 a barrel as a reaction to sanctions against Russia. Stock markets are falling. The currency market is far from being calm.
In addition, cryptocurrency and digital currencies are booming. Russia decided to make cryptocurrency legal in January 2022. Taiwan, on the other hand, introduced a ban on cryptocurrency payments, as China did a year earlier. But China's digital yuan is being successfully tested. Experts believe that it can successfully compete with the dollar in international payments in commercial exchange. After all, the dollar is losing the vote of confidence from many countries due to overusing sanctions.
All these developments are encouraging investors to open accounts with brokerage companies. An important trend that we noticed over the last couple of years is that small local companies are earning more trust and interest from customers while the giants are losing ground. As we can see, this is due to the fact that local companies are much more client oriented and aiming to meet the needs of their small target audience. They are also very flexible and quick to adjust to changes in trends, which big brokers do with a big delay.
It is common in Asia for former big Forex broker IBs to start their own brokerage companies. They have a reputation and loyal clients. To open a company, all they need is a MetaTrader server (recently, it seems, everyone only buys MT5) and Forex CRM. Separating from their former bosses allows them much more flexibility to serve clients and not depend on the policies of another company. All Asian clients who came to UpTrader in the past few weeks are asking for MT5 and Forex CRM.
Finally, working with Asian clients has always been simple and straightforward for us. This is another feature that makes working with Asia quite promising. And the time to enter the market is perfect, because it looks like the beginning of a new era.