The Online Arms Race and Dash for Cash Product Connectivity
Successful stock market events and volatility have captured the interest of millions of people around the world and have dramatically increased the appetite for trading and investing. For online brokers, the explosion of interest is both an opportunity to capture a growing number of investors but also a challenge to differentiate themselves from other brokers in a rapidly changing market.
There is a growing contingent of investors who are now more likely to buy and hold in order to reap longer-term benefits. This growing demand from people who would previously have used brokers or traditional funds
managers obliges electronic brokerage companies to adapt and expand their offering by relying on new asset classes.
The boom in the stock market has boosted demand for money market products such as spot stocks, ETFs, and bonds. There is now a race among the many brokers who have traditionally offered currencies and CFDs, to diversify by increasing the range of assets available to clients looking to either capitalize on the stock market or invest in bonds. while interest rates seem poised to rise.
Simplify market access for cash products
Rapid market access for cash products would have historically been difficult for these players to exploit. Trading in cash products such as stocks is more complex than trading currencies or CFDs, which creates new administrative challenges in having to deal with issues such as client ownership of assets, rights issues and securities. dividends – issues that many brokerages will not have had to deal with before.
Now, sophisticated infrastructure and technology have made easy market access possible, allowing brokers to quickly and seamlessly connect to new features and asset classes. Third party experts are with the broker
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at their fingertips and able to handle the intricacies of adding cash products to their offering, ensuring they are equipped to do everything from corporate actions to taxation as these issues are critical. As one of the very few blue chip brokers to offer connectivity to cash products, we have seen this trend firsthand with a significant increase in the number of brokers wanting the technology, liquidity and know-how to connect to new market access due to new customer demand.
Adding new market access is not a blunt instrument – rather than having to create a whole new asset class on their own, connectivity can be added quickly and focus on market events. and liquidity adapted to specific customer demand. This is made possible by APIs which allow greater flexibility and allow companies to capitalize on touted market events such as hot new IPOs. Take the recent and much anticipated Wise IPO, which became London’s largest tech listing, as an example – before the float, many broker clients wanted to access this potentially lucrative opportunity. Brokerages can now plug in bespoke features overnight to quickly respond to client demand and give them access to a float by requesting and plugging in very specific market access. This helps them stay ahead of the curve by quickly exploiting market events that will capture the market’s imagination to plan their connectivity, stay agile, and capture demand.
Building for the long term
For electronic brokerages, adding cash products is more than adding short-term market access to the flavor of the month. Diversification has longer term benefits, such as building up a brokerage’s assets under management, allowing them to sell other services and asset classes to new investors and ultimately ” build longer-term customer relationships.
Peter Plester, Head of FX Prime Brokerage, Saxo Bank