New Brokerage(Omnibus Mode)
New brokerage is more compatible with our product. Why? Because other traditional trading platforms’ expenses are too high for new brokerages. From the beginning new brokerage has to face low revenue but high initial investment. If they can’t get reward as expected, they will take risk on the fund chain. Every year, every new broker needs to pay more than $50k for the royalty fee of the white labels. The cost doesn’t include the license fee for being regulated under some jurisdiction and the operation fee for the firm. New brokerages have to share their resources. If they don’t do that, they need to take over all the cost, all the risk. And finally all the cost is transferred to the individual traders.
Nowadays the market movements gradually became smaller, the proportion of the cost grew up and affected the revenue for the traders. Obviously this market needs some mechanism to hold the balance, otherwise no trader would like to trade with high cost and high risk. If traders leave the market, the liquidity would be affected as a result.
An alternative product with all the features which other platforms offer is a good way to solve the problem. New brokerages can save more money by paying much less fee and get as good service as the traditional platforms. Maybe the alternative option is not so famous, not so stable. But at least it makes traders and institutions see hopes.
I had some experience to work as introducing broker(IB) before. To be honest, it was not so easy. Why? Because in the business map, there was no position for IB. Why does the market need to pay money for a redundant position?
Let’s see what IB is doing.
- Creating new account for a client.
- Promoting brokers on their website by hanging some advertisements.
- Returning a part of the IB fee to clients as incentive.
These works are too simple. Any normal person can do and replace them on the business map so that this position is really competitive. Then, how to improve the value of IB? Some IBs created trading channels or schools to make newbies subscribe or opened their trading records to make the public copy trade. That’s a good idea. But there is still a problem. It takes time to verify you are a good teacher or your trading strategy is good.
Why not get white label and not create a brokerage business? The answer will return to the first scenario when we talk about new brokerage. The cost is too high.
What if they cooperate with us? I think both of us will get benefit from sharing our resources and advantages. We can get promotion from IB’s market activities. IBs are not easy to be replaced any more, because we authorize them to grant the permission of using our platform.