White labelling is the practice of a firm buying another firm’s product and marketing it as its own. In the foreign exchange (forex) trading market, white labelling is used to purchase and re-brand forex trading software, platforms and sometimes additional trading services that a forex broker offers.
White labelling is gaining popularity in the forex market because it benefits both the producer of the software and ultimate seller of the software to the end user. For product-makers, selling their software and platforms provides them income without having to market their product to traders.
For banks and brokers, white labelling saves them the cost of developing a new software product or platform which can take considerable time and expertise. It is easier to sell the product to their existing customers and in many cases the buyer will arrange to have the product customized with their own name as though they had developed it themselves.
Forex white label products are becoming more prevalent and this development highlights the ongoing trend of consolidation in the retail forex trading industry. The increasing availability of such software in the market as well as the abundance of fast internet connections means that many users have become involved in trading on the forex market. What does this mean for the average forex retail trader?
It could lead to better execution, as trading platforms will become more integrated with one another as more big banks partner with large brokering houses. This will lead to more liquidity and better execution in the forex market.
The product-makers of Forex white label software, in turn, will need to provide dedicated technical and customer service teams to their clients to resolve any issues leading to better client-broker relationships. On the other side of the coin, because forex brokers are now relying on third-party software, they could charge retail customers additional fees. These additional costs could be applied through additional administration fees or by charging even wider spreads than they do now. This, however, is likely to lead to a loss of market share .
With the high level of competition in the retail market and the otherwise high costs of developing forex software it seems that white labelling of forex platforms is a trend that is unlikely to end soon especially with new brokers that seek to provide the best service to clients at the least cost in order to achieve competitive advantage.
