How price spikes hurt your Forex brokerage

Many brokers are aware of spikes, but they mistakenly believe that their impact on revenue is minimal. While fraud inspection is not an easy job, and there are no good ways for brokers to identify all arbitrage hunters, every broker knows those phone calls from traders who suspect that their feed had been erroneous or even manipulated, resulting in a falsely caught “Stop-Loss”. This has to lead to a trade investigation, whereby a decent broker must check the executed trades against the market prices of other market sources.

Unfortunately, most brokers’ access to historical market prices is very limited and virtually impractical when tens or hundreds of trades have to be investigated. After the exhausting (and sometimes incomplete) investigation of these positions the broker may fix the trade data if it is found to be wrong. Obviously, this would lead the trader to wonder of how many past “Stop-Loss” requests were falsely and unknowingly caught. It would also cause losses to the broker, which now has to “pay” the difference resulted from the retroactive change of a wrongly-quoted price. On the other hand, ignoring the trader’s request, by claiming that the prices were right (without really checking or telling the truth), would make your client rethink of the right place to trade.

Price spikes make Forex brokerage clients unhappy

The same works to the other direction: a false “Take-Profit” will inherently incur losses to the broker. Only few of them will be discovered by the broker dealers, meaning that the others will cause losses that will remain unknown. Relevant trades now have to be retroactively modified according to the discovered information (by updating the trade close price to the fair market price). This will cause severe losses to clients, who may then after consider your brokerage firm to be a fraud. On the other hand, ignoring this issue will make you pay the price for another wrong quote.

Leverate has the full solution for these issues: Our feeds are virtually spike less, and our monitoring capabilities let you come to a full circle by giving you the right data of your actual feed against other market data sources at the relevant points in time