The financial market has undergone significant developments in recent years, leading to an increase in the number of service providers who profit from the large number of traders and investors.
New brokerage firms now have increased access to the market, allowing them to cater to specific niches. In addition to regular brokerage services, some entities are offering white-label (WL) technologies or serving as introducing brokers (IBs). Given these options, which would be more suitable — WL or IB?
Understanding White Label Brokers
White labelling is when pre-built software given by a WL provider can be rebranded and adjusted to the broker’s requirements, allowing for a quicker entry into the market.
A white-label brokerage received trading software from a provider that can be customised according to the business needs, such as payment systems, financial instruments, and leverage. This saves time and resources compared to building trading software from scratch. Developers charge fees based on the software’s complexity and flexibility.
Understanding Introducing Brokers
Introducing brokers connects brokerage firms with investors and traders and encouraging them to register and trade on the firm’s platform. For this service, IBs charge commission fees based on the investment volume. They don’t participate in trading decisions or currency pairs, but only track client performance.
Introducing Brokers vs White Label Brokers
Essential to the evolution and growth of brokerage firms, both models significantly promote the firm’s market presence, ease of operations, and client reach. Here, we delve into a comparison of these two key players – introducing brokers and white label services.
Business Structure
Introducing brokers play a crucial role in widening the client base of brokerage firms, thereby earning them commissions and aiding the expansion of client investments. White label brokers, conversely, are equipped with adaptable technical solutions like trading systems and platforms, tailored to align with the broker’s unique requirements.
Software and Technology Utilisation
The integration of technologies such as investment portals, emailing services, trading systems, payment gateways, and market access necessitates advanced proficiency and responsibility from turnkey solution providers. On the other hand, introducing brokers leverage the broker’s existing tech infrastructure to extend their service offerings, focusing more on networking and communication to onboard new clients.
Scalability and Flexibility
While introducing brokers are typically restricted to the service offerings and trading products of their respective brokerage firms, Forex white label services stand out with their high adaptability and scalability, catering specifically to the broker’s unique business needs.
Fee Structure
Upfront charges are the norm for both white label and turnkey solution providers, with the latter’s fees varying based on the demanded features and the requirements of the brokerage. As for white label providers, a range of pricing plans are offered. In contrast, introducing brokers earn their revenue through commissions, depending on the trading volume of registered clients or their quantity.
Verdict
In the complex world of FX brokerage platforms, two forms of business entities have emerged as game changers: white labels and introducing brokers (IBs). Their critical role lies in their capacity to broaden the horizons of these platforms, letting them penetrate new client bases and extend their line of technological offerings.
White labels are essentially the backbone of these platforms, lending support in the form of trading software, payment systems, and a myriad of other essential requisites. They provide a full suite of services that free up the brokerages’ internal resources, allowing them to focus on strategic growth.
On the other hand, introducing brokers function as crucial links that bridge the gap between brokerage platforms and their end users. By establishing fluid communication lines, they ensure that user needs are effectively communicated to the brokerage firms. Together, white labels and IBs lay the groundwork for a thriving FX brokerage ecosystem.