Foreign exchange bridging technology is an important tool in foreign exchange transactions and one of the products after foreign exchange technology optimization. Through this introduction, we can know the important role of foreign exchange bridging technology in foreign exchange. Today in this article we will take a closer look at the functions of foreign exchange bridging technology.
Foreign exchange bridging is the main link connecting foreign exchange brokers and liquidity providers. After foreign exchange dealers use MT4, they must connect to the liquidity of the inter-bank foreign exchange market through a bridge, and then provide customers with quotes.
Generally, the bridge is mainly designed for the traders of NDD (No Dealer Platform Mode). These types of brokers can use the bridge to throw customer orders to the international interbank foreign exchange market. For traders with the DD (Dealer Platform Model) model, their orders are usually matched transactions in their own internal liquidity pool.
Bridge technology is necessary for brokers, but not every broker has the strength to be equipped with technical experts or programmers, so most brokers outsource the bridge technology to professional bridge technology companies, such as Gold-i, PrimeXM, etc.
The use of foreign exchange bridge providers means increased costs. For many brokers, the integration of several foreign exchange bridges also means rising costs, which is bound to weaken the biggest competitive advantage of MT4. As of now, there is no case where a retail foreign exchange broker uses the MT4 platform without additional software fees. Bridge providers charge more than one percent of fees to brokers, making these brokers face tens of thousands of additional fees.
The key to choosing bridging technology?
When choosing bridging technology, it is necessary to figure out what types of orders the bridge supports and how to handle them. In particular, it is necessary to understand the support for limit and stop loss orders, and how liquidity providers choose these orders. Usually, the bridge only executes such instructions within the platform activation time, so it may cause execution delays and additional quote slippage. Therefore, choosing a liquidity provider that supports such instructions will help avoid related problems. In addition, a good bridge technology, It can provide a lot of functions and have flexible rule settings.
A good bridge has the following functions:
- Ability to filter: Users and user groups can be formulated according to the currency types configured to determine which needs to be cleared and which do not need to be cleared.
- Multiple channels: designated clearing opponents, providing multiple simultaneous clearing technologies
- Optimizing the price: a way to assign the transaction price to the client based on the price of the clearing party
- Order mode optimization: conversion and execution optimization of limit orders and stop loss orders.
- Optimization of large transactions: Split orders for large transactions and execute them in batches.
The role of foreign exchange bridging technology:
Increase customer loyalty
For retail foreign exchange brokers, the biggest advantage of bridging solutions is to increase customer loyalty and process customer orders more efficiently.
Andrew, co-founder of oneZero
Ralich once said: “A broker has three main tasks: continuously attract new customers, maintain existing customer relationships, and manage internal operations. In these three main categories, bridging technology continues to bring added value to brokers. For example. Said that when a broker promotes its stable, 24 hours a day, 5 days a week service and market access, it must be supported by good bridging technology.”
Maintain platform stability
The scalability and reliability of the bridge are critical to transaction execution and platform stability. Any liquidity bridge with a delay of more than a few milliseconds is not acceptable. Ralich said that brokers must ensure that their bridging technology providers fully understand the trading platform. The MT4 bridge usually needs more than a month of repeated testing and research before it can finally be optimized.
Forex trading platforms have different order execution modes. The most frequently mentioned are the ECN (Electronic Communication Network) and STP (Straight Through Processing) modes. Therefore, according to the different execution modes of the platform, MT4 bridge technology can be divided into ECN model and STP model. Bridge technology does not force the broker to use a certain model.
More and more customers use algorithmic trading and the methods are more sophisticated. Many brokers are no longer willing to take the risk of opposing transactions. This has prompted more and more brokers to provide STP and ECN trading models, which helps reduce risks. “Smart brokers will constantly evaluate the possibility of customer profitability, and then decide their own trading model.”
The most important thing about bridging technology is its role in reducing risk. After installation and customized settings, the bridge can effectively reduce the trouble of risk management that foreign exchange brokers are facing.
Industry professionals believe that bridging technology provides brokers with greater transparency and increases the effective information they have access to, so that they can continue to make beneficial decisions. The current liquidity bridge can support different types of operation and execution modes of foreign exchange brokers and help avoid risks.
The bridging technology includes low-latency STP, flexible order paths, advanced customer information, extended administrative operation capabilities, and liquidity management operations, thus greatly saving brokers’ time costs in operation and risk management. In particular, some bridging technologies can monitor slippage and trading conditions in real time to maximize the profitability of the broker.