The Importance of Deploying Third-Party Capabilities in White Labelling

Change and challenges are the constants of the financial markets. Younger traders today want 24/7 access to the global financial markets and enhanced trading experiences across devices in a secure and fun manner. The generational wealth transfer is creating a demand for new financial services and investment vehicles for these new investors. For example, by 2030, Generation Z would have amassed earnings worth $33 trillion, accounting for more than a quarter of the global income. As this generation moves into the markets, ESG investments are expected to garner much larger focus.

At the same time, increasing regulatory pressures are pushing brokers and financial services providers to spend more on cutting-edge technology and compliance, just to satisfy the latest requirements.

For years, forex start-ups have relied on white label (WL) services to cut down on their time to market. They knew that outsourcing non-core functions and finding cost-effective solutions were critical to staying competitive. Plus, with effective partnerships, they could live up to the expectations of clients, offering higher-end trading services, extensive choices of financial instruments, and advanced technologies, while focusing on what they do best.

Yet this model led to a number of issues:

• Brokers had no control over the technology, features, and developments. This meant an inability to self-serve the basic administrative functions.

• Difficulty in switching between service providers. Such a move could be time-consuming, expensive and the disruption could result in client attrition.

• The inability of the platforms to scale with the broker’s business.

With various external pressures, brokers are now re-assessing their business models. Simply put, the days of “plug-and-play” solutions are over. Forex start-ups want to work with white label providers who can tailor solutions according to their changing requirements. They are increasingly looking to deploy third-party capabilities, allowing more personalisation and flexibility.

Open API Is Becoming Mainstream in White Labelling 

From personalised financial services to complete banking ecosystems, Open APIs are at the forefront of technological innovation. APIs allow organisations to source specific services from third parties. For instance, if a broker wants to address customer demand for certain service that their WL service provider cannot provide, they can source the service from another provider, without resorting to a massive overhaul of their entire system. In a traditional white label model, this isn’t possible.

So, API capability supports complex and bespoke product offerings and facilitates a modern multi-service provider model. For a broker, this means differentiation and more business. In a recent Trade-Ideas Retail Servicers Survey, 81.4% of respondents said that trading from third-party tools, other than those provided by their broker, would be a significant value add for retail clients. This means that independent services and utility providers can help with client acquisition for brokerages, depending on how robust their executing API is.

This is not to imply that these third-party services cannot be accessed through a broker’s platform. As APIs become increasingly advanced, integration becomes easier. This is a major benefit to the traditional liquidity provider broker model. The broker needs very little technical expertise to provide customised and high-end services.

Advances in consumer industries mean that traders demand breakthrough features in their trading platforms that they experience elsewhere. This includes real-time responsiveness, customised offerings, and seamless interchange between devices, channels, and platforms. To enable all of this, white label providers need to ensure that their platforms are based on OpenAPI technology for further integrations. This will facilitate WL platforms to make deeper digital relationships with their partners.

In fact, over time, API-based data exchange and communication will become the norm in the finance sector.

Some Popular Third-Party Capabilities in FX White Labelling

Liquidity Partnerships

Traditionally, white label providers were larger brokers who provided liquidity to forex start-ups. In turn, the forex broker would onboard its client base on the server of a direct competitor. This dependency was dangerous. If the provider ran into financial or regulatory problems, it meant that the start-up business would lose all its clients and data.

So, now brokers are looking to solely focus on liquidity partnerships with technology providers, rather than a large broker. They simply plug the liquidity of these platforms in. For example, London-based itexsys provides brokers the option to choose their liquidity provider. The company is not affiliated with any broker, which means partners can source multiple liquidity feeds and even change their provider at any time.

Embracing Cloud for Deployment

To service a geographically dispersed franchise, cloud technology is a necessity for improved distribution capabilities. TradAir allows brokers to launch a fully cloud-based marketplace in just two weeks that is compliant, supports trading and easy STP integration through APIs, and supports an extensive number of securities, including single, basket, and currency pairs. 

Research and Analytics

The most comprehensive white-label offerings include research and analytical tools. Brokers want business intelligence tools in order to gain a deeper understanding of their clients, trading operations, and profitability. Deeper insight into the trading behaviour of clients, such as pricing sensitivity, volumes and hit ratios, can allow brokers to provide more tailored and optimised solutions for them.

These tools can also make a huge impact on minimising risks. End-users are also increasingly looking to their brokers for tools that enable pre-trade decision making, along with volatility and correlation analysis, charting tools, and valuation and portfolio analysis tools in the post-trade stage.

Regulatory Reporting

Regulatory requirements of the MiFID II are vast. Accurate and timely trade reporting is crucial. The US has also mandated that platforms should provide detailed trade reports to brokers and clients. Platforms like CMC Markets Connect offer services like EMIR reporting to make such broker obligations simpler to fulfil. The system produces data files in a generic format that goes into the delegated back-office systems. The CMC model is also based on the OpenAPI and HTML 5 model, making way for individual models to be easily deployed in third-party environments. SaxoTraderGO, a trading platform based on REST-based OpenAPI, also supports these functionalities. 

Clearly, the FX white labelling industry has evolved from just branded GUIs and marketing materials. The future lies in the platforms’ abilities to integrate the latest technologies like AI, machine learning, cloud, and more, to meet clients’ evolving needs.