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Technology / AI and automation

Alpari plans more sophistication for retail forex clients

Alpari hails from Russia, where it has been involved in foreign exchange market (forex) trading for 10 years. Specifically, its UK business has been established since 2004, operating with an FSA license since 2006. The company also has a burgeoning business in the US, with offices in other geographies – including China and Dubai – to be added in the coming months.

Alpari also offers contracts for difference (CFDs) on futures, equities and precious metals in Russia. CFDs are agreements between two parties to settle, at the close of the contract, the difference between the opening and closing prices of the contract, multiplied by the number of underlying shares specified in the contract.

Given the popularity of CFDs in the UK, it is logical that the company extends the offering to that market too. Specifically, Alpari plans to launch CFD Level 1 in the country by mid-2009 and plans to add CFD Level 2 at a later date, which includes features such as automatic hedging.

The technology platform that underpins Alpari’s business is the MetaTrader, specifically version 4 (MT4), from Russian developer MetaQuotes Software. This product claims to have grown from domestic to global market dominance in forex trading services for retail customers and has some penetration in the institutional space, although that is limited at the moment by MT4’s lack of support for straight through processing (STP). MT5, due out in the second half of 2009, promises to support Level 2 CFDs, implying that it will support STP. However, Alpari plans to launch STP ahead of that development, offering it on the MT4 platform.

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Alpari’s strategy is to develop plug-ins to the platform for additional functionality, such as one that enables automatic rather than manual hedging of positions. Together with the firm’s adoption in the UK market of the prime brokerage model for its dealings with banks, multi-bank pricing feeds and give-up agreements, these plug-ins will enable it to talk of the increased sophistication of its retail services.

For this same reason, Alpari will launch a percentage allocation management module (PAMM) and a lot allocation management module (LAMM) in the first half of 2009, which it believes will be the first of their kind on the MT4 platform.

These are management accounts that allow the trading of multiple accounts as if they were one, which gives customers the best entry/exit prices available. Additionally, the PAMM and LAMM keep each client’s account records individually, so gains and losses can be distributed on a percentage basis. As such, each client receives the same percentage rate of return regardless of the size of their account.

There are a number of other innovations on the way from Alpari this year, including an educational program for clients and prospects with two free levels (online tutorials and webinars with Q&A capabilities), plus one which must be paid for (five-day training seminars). Again, Alpari has implemented these strategies with the intention of raising the level of expertise in retail customers (particularly those at the lower end of its market), while simultaneously familiarizing them with the Alpari product offering.

Several of Alpari’s most serious competitors in forex are offering some level of trading on MetaTrader, though a number of them offer it alongside their own proprietary technology. It will interesting to see whether they too invest in developing more sophisticated features and functionality for the MT4/MT5 product or persist with their own platforms for their more demanding customers.

There are also plans for a white-labeled offering of this more enhanced, STP-enabled MT4 to large banks. Alpari argues that while institutions such as Barclays and Deutsche Bank are already addressing the retail online trading market in forex to expand revenues, none are currently able to offer their services on MT4. The company believes that the product has some key advantages over proprietary platforms, such as its reliability, stability and its technical analysis package. Indeed, the only thing currently holding it back from broader institutional take-up is its lack of STP support.

 
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CBR Staff Writer

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