Hi Forex Pipsters, my name is Kathy and i am doing research and groundwork for a group of fund managers(FMs). They intend to launch a retail FX Brokerage. This FX Broker will pretty much clear their own FM orders first and then have the same platform clear orders for the retail clients as well.
My job is to find out what the retail market wants and how we can position this right to cater to the market now. This is a very competitive space and we thought of asking you guys first as to what matters and what doesn’t before starting this new venture. So, if i may, please give me a few minutes of your time and please tell me what do you look for in a broker.
I have some QnA for you and some open ended questions, that perhaps you can give your creative best shot. Thanks so much in advance! You can answer whatever you want. Thanks!
In your opinion, give a rating of 1-5, where 1 is least important and 5 is most important, how important are these aspects of the company to you;
a) Regulation - Is the company licensed/regulated? State 1 - 5.
b) Jurisdiction - Where is the company incorporated? Is it a reputable jurisdiction? State 1 - 5.
c) Who is the management team? State 1 - 5.
d) Are my funds safe? State 1 - 5. State what kind of safety of funds assures you?
e) Cost of transaction - Low Spreads? State 1 - 5.
f) Trading Environment - Scalping/HFT/Hedging allowed? State 1 - 5.
g) Value added services - Free EAs/VPS Hosting/Signals? State 1 - 5.
h) Physical Office - Place that you can visit and talk to someone? State 1 - 5.
i) Training/Research/Analytical Material - Quality/free analytical market insights and training webinars/workshops? State 1 - 5.
In your own words, what is the number 1 factor that you will consider before you choose a broker?
In the current space, what pisses you off the most with what the brokers offer you?
If there are suggestions or things you would like your ideal broker to do, what will they be? Please keep your suggestions up to a maximum of 5 and kindly sort them in order if you can, from the most preferred to the least preferred.
Thank you once again for participating. It is an opportunity to have your voices heard to get your ideal broker service. Best Wishes!
1a) 5.
1b) 5.
1c) [B]3[/B], since the names won’t mean much to the majority of traders, as long as Soros et al aren’t in the team; obviously expertise and experience are important though, so the background must be there, and it should be possible to check that background.
1d) [B]5[/B]; funds to be kept in segregated accounts with a bank showing at least AA-rating.
1e) [B]3[/B] (other things are more important, although transaction costs must be reasonable).
1f) [B]4[/B] (traders must be free in their choice of transactions; ‘FIFO’, ‘No Hedging’, and ‘No Scalping’ will make many traders disregard a broker, and rightly so).
1g) [B]1[/B] (freebies often make me wonder which weaknesses are supposed to be covered by these ‘gifts’; I’d never consider a broker who places a lot of emphasis on his bonus system or tries to lure customers by offering free VPS).
1h) 2.
1i) [B]2[/B]; I’d personally prefer a competent and friendly customer service over a signal service or a webinar offer; education can be done elsewhere, let the broker concentrate on more important issues.
Apart from being regulated and based in a jurisdiction I can trust, the most important issue for me is how the broker handles disputes after technical issues (slippage, slow execution etc); my current broker handles justified and proven claims swiftly and fairly, which is the reason I continue doing business with them. Technical problems do occur, and they afflict every broker … how they are being handled shows a lot about how honest and serious a company is.
I really do not like and do not trust all the bonus offers brokers make; the conditions are close to impossible to meet. Boni are merely a lure for new traders, enticing them to overtrade; in the long run, only the broker profits. This strikes me as highly dishonest, and I find it personally annoying.
No further suggestions; you may deduce some from questions 1-3.
1a) 3 - Regulation is important, but doesn’t have much value on its own. It gets interesting when it is combined with a compensation scheme.
1b) 5
1c) 2
1d) 4 - Compensation scheme, segregation of funds, regular audits (4 out of 5 because even if there is an custodian involved safety of funds is almost impossible to prove on an ongoing basis)
1e) 5
1f) 5
1g) 1
1h) 1
1i) 2
Hard to say. Probably a combination of the above mentioned points combined with gut feeling. If I have a bad feeling about a broker it doesn’t matter how good the conditions are, I will just stay away.
I don’t like it when brokers simply lie on their website, e.g. stating that they are regulated if they are just registered or something like that. I also don’t like it if they invest more in advertising than in their infrastructure.
There is no ideal broker, you can only try to find one that fits your needs.
Thank you jfx, i appreciate your reply and time taken to answer this. There has been mention of a compensation scheme in your reply. What does this mean pls? Is it some sort of insurance to cover clients’ deposits or a regulatory backed compensation scheme to pay back the clients incase the company goes bust?
Usually the compensation schemes are not part of the regulatory supervision, but compensation might require the company in question to be regulated. The idea is to compensate clients if the broker is unable to pay claims.
