Changing demand-supply dynamics, increasing awareness about investment options and growing popularity of the forex trade is encouraging people from all walks of life to try their hands in forex trading. But there is a select group of investors who may not have the risk appetite or depth of investment to take significantly large positions. The brokerage that specializes in providing this kind of service is known as Prime Of Prime brokerage.

Not only does their service include mini contracts for traders but also they allow a significantly higher leverage too. Essentially these are smaller trades with higher risk and lower profit margins. First and foremost let us understand how a Prime Of Prime brokerage is exactly defined.

Many small regional banks and brokerages have come up with smaller currency trade options to suit the conveyance of their clientele base. Many regular brokerage would not want to get into this kind of trade for the simple reason that the cost efficiency factor slips on this count.

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Most time you would notice PoP brokerages also facilitating regular trading lots at higher leverages. This is mostly due to the regulatory benefits of operating as a Prime of Prime brokerage. The emergence of this type of brokerages in recent times can be mainly attributed to the pressure from many interested and educated small time investors who want to be treated better than how brokerages have been doing thus far.

This oftentimes results in them giving into the temptation of skewing prices in their favor and ignoring the interest of many retail clients. However as clients, you should take nothing at face value and verify and double check every element. Increasing demand for POP brokerages does not just signify a shift in trend, but also brings forth the obvious advantages of changing trends and better techniques.

Ease of usage is one of the biggest factors for the growing demand for this kind of brokerages. Many users believe that flexibility of use also brings forth a more speed and convenience in trading. Also, pricing is another key factor.

The effort to maintain fair pricing ensures that both brokers and clients will go the extra mile to ensure a smooth flow of liquidity. The low margin is also a big push that makes every broker ensure that every penny counts and excel in their chosen trade. The wide network provided by the similar organizations also adds to the flexibility factor in using a POP brokerage. Leverage is definitely one of the most attractive features of a POP brokerage.

Compared to a conventional prime brokerage, a POP account has the flexibility of providing a significantly higher risk. Several POP brokerages can actually provide leverage limit as high as to 1.

Foreign Exchange Prime Brokerage – ADM Derivatives

Technology is another major plus in terms of opting for a POP brokerage. To ensure that they can bring about a significant difference and excellence in service most of these POP firms use technology to provide a strong base of their retail clients. Technology also enable these firms to service a wide number of clients, processing as high as thousand tickets a day.

Their choice of low latency network also helps reduce trade rejections due to connection delays and network disruption. This also has a direct impact on the pricing structure which remains stable mainly due to the high volume in a low margin scenario. Many industry experts believe that the looming regulation changes and stricter norms will only encourage mushrooming up of a higher number of this type of firms. The greater regulatory requirements and higher risk and liquidity management will be instrumental in furthering the popularity of POPs.

In an environment where competition is rising every second and banks are becoming more unwilling to take risk for smaller brokerages, the POP model can be a very cost efficient and profit generating platform for making it big in the world of forex trading.

Another interesting feature is the full range of compliance based hedging services provided by most of these Prime Of Prime firms.

They specialize in bringing forth an innovative and customized trading solution aimed at satisfying their specific needs of their client base. Another major charm for this kind of a trading medium is the reach and accessibility that the POPs ensure. Lot of these new entrants in the retail forex trade business without the ability to source credit through banks, the POP firms come up as a more practical solution with efficient networks and smooth monitoring and execution of trade activity.

For many, who earlier thought trading is out of reach for them now finding it a viable investment option. Among the many other factors that might interest a forex broker to choose the POP model, managing the complex integration issues is a big positive. Also, this integration enhances an easier customer service for the client base. It also helps foster a stronger bond between the broker and retail clients and this integration in many ways enhances better transparency in trade too.

Despite the obvious advantages, innovation is the trick to remain relevant. As the success of these POP firms continue, the brokers have to look at new ways to enhance their business and provide scalability in their business and tackle the inherent volatility in the forex market.

The terms of leverage are a major pull and improving risk management and liquidity terms would be always high on the priority meter. Also, margins are a major issue to consider. Normally these firms work on a very low margin scale and spiking up volume is what will propel incremental growth. In other words, the challenge currently is to develop capabilities that address the core liquidity, leverage and credit issues and can seamless weave in technology to improve these services.

Verifying the credentials of a POP firm is another key factor that forex market players must take a look at. The benefit that a genuine POP player can bring to play outscores the services of one with hard to prove credentials. A bonafide POP can at times provide service that could outscore even regular forex brokerage firms given the technological edge that they have. So PoP offer mini contract account for small retail traders? So what size of accounts do they offer? It is almost a setup.

But the other two have some negative points. Get Our New E-Books For Free.

What Is a Prime of Prime or POP Brokerage in Forex Trading By: Forex Brokers Last Updated: Enter Your Email Address and Check Your Inbox: LEARN A PROVEN BUSINESS PLAN.

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