A Regional Bank with a Vision

The story begins in a small city in the northeast United States. A small regional bank wanted to grow and their executive committee carefully evaluated their options. After a long and careful search the bank hired two experienced FX traders who knew that economic conditions were changing and that globalization was a factor they could not ignore as they looked to the future.

The decision was made to establish a wholly-owned FX subsidiary. The senior hire, who had gained much of his experience in Europe, led the efforts to write the market evaluation report that was presented to the bank. “Our original idea was to establish ourselves in the traditional inter-bank Forex market”, he said. “But after a few months of operation the changes in the Forex landscape became apparent, we were missing the much more profitable on-line retail FX segment of the market.”

The two Forex traders realized that the market dynamics were shifting, virtually right before their eyes. There was a strong new market developing, in this country but mostly abroad, of smaller retail accounts. The market was sizeable and getting bigger every day.

What is the Engine Driving e-FX Growth?

“The main driver is technology and the Internet. Internet use is booming all over the world and many more people are online. Then too, the technology to enable trading is much better and easier to scale to massive numbers of users. Finally, there is the allure and excitement of this market itself. It is fast, thrilling and highly leveraged. The Forex market is open 24 hours a day and offers great liquidity any time of the day or night. The cost of entry is low because the margin requirements are quite high. Transaction costs are also low. At the same time, more traditional markets have a much higher cost of entry and a much lower potential for profits.

“Another reason for market growth is the greater sensitivity to currency exchange in other parts of the world. Americans don’t think much about currency exchange rates, but in Europe, South America, Australia and the Far East, the average citizen is acutely aware of currency rate fluctuations that directly affect their lives. I’m sure that there are other reasons as well, but the bottom line was clear: the biggest potential for growth in Forex is the fast-growing retail trade market.”

The two Forex traders wrote their report recommending that the bank could expect much better returns on their investments in the new retail segment of the FX market than they could in inter-bank trading. The executive committee accepted these findings and decided to enter the online retail Forex market.

Because of the comparatively small size of the bank and limited IT and cash resources for this project, they concluded that the best route was to find a technology provider with an established platform.

They required a platform with a low cost of entry, proven stability and reliable, built-in risk management functionality to prevent the bank from assuming excessive risk in this new venture.

The bank evaluated several providers and ultimately chose ActForex because of their successful track record in the industry and also because of the completeness of its solution. ActForex provided a turnkey, comprehensive solution that included a front office with multilingual interface, a middle- and back-office, extensive reporting and 24/7 customer and technical support.

The bank licensed the ICTS platform from ActForex and built a website to establish and brand the new business. While the retail Forex business was wholly owned by the bank and carried the bank name, the plan was to market the new company independently.

The bank worked closely with ActForex. To help market the new trading company, ActForex customized an intuitive, easy-to-use interface with all tools needed by traders and all controls required to manage the business. They also offered a demo platform that could be used to train novice traders quickly and easily.

When the platform met the bank’s standards, the bank began advertising their platform, under its brand name, on the Internet.