Risk management is often perceived as mysterious and mystifying but an endeavour that must succeed for the good of the business. The necessity will always be true, but the perception shouldn’t be true at all. Whether it be trading industry insiders, financial market participants, or even the financially unsavvy, most have a vague perception of risk and, typically, as a costly afterthought.
In retail trading, dealing desks are entrusted to risk-manage the firm’s solvency – assuming they do not rely on “magic” to conjure results. When it all doesn’t go to plan, dire consequences follow. In 2015, dozens of millions were lost in seconds when the world’s third-largest retail broker – Alpari (UK) – mismanaged its market and counterparty risk during a sudden bout of Swiss franc currency intervention.
The same wave affected several other brokers, including FXCM, the world’s largest at the time, while other firms, such as Effex Capital and Boston Prime, faced similar challenges. They all learned the hard way that risk management is where brokers should start, not finish.
Different Folks Different Strokes
Dealing has always been at the core of broking, with faulty offerings incurring…
