Is this the end of white labelling?

Marc Aspinall, Head of Global Sales, ADS Securities.

For the last few years there have been three choices for brokerages setting up an electronic trading platform – buy, build or white label (WL). The advantages of going for a white label solution have been well documented with many industry experts recommending that brokerages focus on their strengths by outsourcing their platform requirements to WL providers.

In the past white label options have either been a partnership with a technology provider, rebranding the services of a brokerage or a combination of these two options. The primary consideration for brokerages choosing a white label solution has quite rightly been the strength, or the popularity (in the retail space), of the technology. However, through 2014 new options will become available which combine state-of-the-art technology with a higher level of customisation.

So why is this the end of white labelling? White labelling has traditionally allowed brokerages to introduce a little bit of ‘colour’ but most users if they looked hard could see where the base product comes from. There is no issue with this, and through 2013 we saw the launch of a number of ‘broker in a box’ type of products, often linked to cloud applications, which offer the ability to start a brokerage in a very short period of time.

But we are now seeing the end of simple white labelling and the development of deep white labelling solutions. These allow brokers to buy-in a complete package, and tailor it to their exact requirements so that they can develop a unique product. For us this is the important factor. The forex and online trading market is becoming extremely competitive, with clients becoming more discerning and demanding. Simply providing brokerage services based around off-the-shelf solutions may no longer be enough to ensure success. A deep WL solution can give access to proprietary and bespoke technology, which goes beyond changing the look and feel of screens. It offers a very sophisticated low-touch environment which can be re-engineered to provide the products and services the brokerage wants to provide.

The white labelling starts with the platform but also needs to offer access to client portals; risk management and middle office functionality. From consolidated audit blotters through to monitoring volumes in real time, the broker can be in control of their clients’ trading. This gives them a high degree of functionality and reduces their cost base, allowing them to focus on areas such as their marketing and sales.

With this view in mind in 2010 the ADS Securities development team set out a specification for a fully integrated multi-asset platform, Orex, which from the ‘get-go’ was designed so in the future it could be offered as a deep WL solution. From the drawing board to implementation Orex was developed using component-based architecture. This structure allows white label clients to fully engage with, rather than rent, the technology. It offers clients a branded platform with unrestricted administration; risk management; back and middle office services into which brokerages can feed their own liquidity.

The Orex platform was launched in Q4 2013 and is being continually updated with new releases and increased functionality. The platform development is being led by an in-house team working with external blue chip technology partners. The systems and integration teams all have Tier 1 bank experience and understand the importance of providing tried and tested turn-key solutions.

It is also very important that the Orex was designed as a multi-asset platform. Some multi-asset platforms have been developed by bringing together and linking new or legacy systems. These can provide a certain level of functionality but often do not provide a holistic, cross platform, approach to areas such as risk and margin. By developing Orex to support both OTC and on-exchange products it provides a level of sophistication which is not available when using a single product platform which has been built-out to provide access to an expanded number of asset classes.

With any deep white label technology it is important that it is scalable for institutions as well as retail brokerages. It needs to be delivered through a number of different access platforms including desktop, mobile, tablet and web-based. It should be available for both collateralised and agency clients with 24/5 support across all markets. The technology should allow for full administration control so there are no restrictions on the way brokers manage their clients. This means that they can implement changes using their own administration tools. A brokerage must be able to specify its requirements from a flexible ‘a la carte’ menu rather than picking from one or two options. This approach gives day-to-day operational functionality to the client.

A range of users, from institutions through to low volume retailers can benefit from deep white labelling. They can look carefully at their capitalisation, set the risk levels and concentrate on client acquisition. Our role at ADS Securities and other suppliers is to provide a tool kit of functionality which allows the broker to go to the market with a bespoke, sophisticated product which does not look or feel like a white label. The broker can then create a ‘sticky’ product which retains, rather than churns clients, and allows them to continually develop the services they provide.

These may all be very useful benefits but when they are available from a multi-asset platform the trading advantages can be seen. The ability to offer OTC and exchange-traded products means that the broker can introduce new products without needing to develop new WL agreements and introduce unlinked technology – with the associated risks.

White labelling has always been an efficient and expedient way for brokers to set up and start trading. Whether the WL technology is cloud-based or traditionally supplied, it must provide trading advantage. In 2014, if brokers offer a standard white label product their clients will know that they are getting a very standard service. If it looks the same, does the same and trades the same as a number of other products, clients will know there is no USP. If however they look at one of the new deep white label products they will be able to generate real business advantage.