Retail Forex Broker Industry Update

Is all well and back to normal in the retail FX brokerage space? by Christian Dove CEO Synergy FX

I actually think not, and we as traders would be foolish to think it were. After the now infamous tactics of the Swiss National Bank to remove their currencies peg from the EUR on the fateful "black Thursday", we've seen a very interesting rebound of the crosses. However, please don't underestimate their ability to shock the market and do it all again. The SNB has recently been in the press subtly threatening as much.

Interesting to see how players that have been bailed out have now put Draconian restrictions on what they will allow the trader to trade. Hardly free markets, but clearly those bail-out boys don't want to risk that cash for anyone. Allow me to just have my chance to personally rant about the ignorance of shareholders that may decide to try and sue the brokerage house for neglect - what for? For running an agency model? When will equity investors actually realise there is risk in being an equity holder? You rarely have your cake and eat it - food for thought.

Where I think the structure of the market is changing, and where the really interesting rumblings are happening, is with the first tier banking prime brokers. Credit risk is rearing its ugly head again. Those dreary brown suit, Mickey Mouse tie wearing utilitarians from grubby back office rooms that spend their lives pondering the VaR on any given transaction are having to adopt the "bugger - missed that one" approach. They become reactionary and just block everything until the dust has settled, so “don't blame me”. (I used to be a banker - it's a respect thing). Credit is not just a function of premium you're prepared to pay - before that it's binary. Is it on, or is it off? It seems now that it may be off.

All this means that the original banking providers that were historically the top of the food chain and prepared to offer prime brokerage services to the PB tier and broking businesses below may not be so numerous now. That doesn't mean the banks aren't quoting and that business isn't happening - it just means the funnel is smaller.

So what's the net result of this squeeze to us the trader? It means for a short period we are all seeing slightly wider spreads. From a broking house infrastructure side it means the dodgy will get dodgier and the quality houses need to be judged on more than just maintenance of spreads. Synergy and other Australian licensed brokers are the right place for you to be doing business. I'm proud that we are weathering this storm well. We've seen huge interest in our Hybrid account that offers the trader negative equity balance protection. With real quality customer service and account security, please do not hesitate to speak to any of my staff who will help you through every step of your trading career.