How can FOREX firms benefit from APIs?

4 min reading
How can FOREX firms benefit from APIs?
How can FOREX firms benefit from APIs?


The FOREX market is the world’s largest market in terms of trading volume. Although it is a market that has a lot of room for improvement in terms of digitalization. This paradigm may be shifting due to open banking and all the potential provided by banking APIs, by streamlining all the processes and operations in this market.


Since Richard Nixon decreed the non-convertibility of the dollar into gold in 1971, the FOREX market, where currency pairs are traded, has never stopped growing. So large has it grown, in fact, that today it is the largest financial asset market in the world, with a total volume of some US$5 trillion a day.

It is a crucial market for international trade, given that it is used for fixing the exchange rate for currencies used in cross-border transactions. The forex market, on the other hand, has a lot of room for improvement: processes need to be streamlined to reduce friction, customer experience needs to be enhanced, and investors need solutions that operate right away, 24 hours a day.

This is a process that open banking in general and APIs in particular can drive, offering a number of benefits to the process of buying and selling currencies and to FOREX companies.

How does the FOREX market work?

The FOREX market is an Over The Counter (OTC) market, i.e. a market where the parties agree the terms of the contract between themselves without the intervention of a regulatory body. This makes it quite different from other organized markets where transactions are settled with the backing of a clearing and settlement house, such as the stock market.

It is a 24-hour trading market through a global network of banks, spread across four main centers in different time zones: London, New York, Sydney and Tokyo.

Because of the huge number of daily trades, the FOREX market is a totally liquid market, even though it lacks a clearing and settlement house as such. But it also poses certain challenges for companies which allow the purchase and sale of currency pairs. Agility and speed in operations are critical, but it is also important to guarantee the integrity of user information and data.

How can FOREX firms benefit from APIs?

Open banking has become a technology that generates a wealth of opportunities for FOREX firms. It makes for a better user experience, but also faster and more secure operations that comply with all legal requirements.

This is made possible through opening the banking infrastructure to third parties through APIs, through which FOREX firms can include the banking functionality on their platforms, themselves offering open access to their clients. This offers unlimited benefits in terms of agility and improved user experience.

Easy to open accounts in FOREX companies

One of the main drawbacks of companies trading FOREX, and, in general, of any broker, is that opening accounts is a relatively difficult process. Often, users have to hand over a lot of documentation, such as an ID card, bank statements – and go through a rather complicated process to confirm their identity.

According to the latest legal requirements, companies must also make sure that users are actually who they say they are, and share this information with the government. This process is so drawn-out and tedious that users often end up going to other platforms instead.

Open banking streamlines the account opening process and user accreditation for legal purposes. Thanks to some APIs such as BBVA Customers, customers may share their identification data with third parties, once they have agreed. This allows non-banking entities, such as any FOREX-related entities, to swiftly approve customer applications and fulfill KYC requirements without customers having to go to their premises in person.

Faster analysis of risk in transactions

Many stock exchange trades can be made either on a spot basis or by financing (or leverage) and FOREX trading is no exception. FOREX firms themselves offer this type of financing to facilitate trading for their clients.

Just as with any other method of financing, however, companies face a certain level of credit risk, especially if the borrower is not creditworthy enough to be eligible for such financing.

Using APIs such as Accounts PSD2, FOREX companies can perform risk analysis of credit operations, based on data provided by the account information service. For example, in these types of forward agreements, they can use such APIs to instantly calculate how much cash the customer has and so grant facilities and limits accordingly. Data reliability and speed are essential in these kinds of transactions.

Giving account status information

The more information the FOREX company gives its customers, the more attractive the application will be. In fact, in some cases, many users ask for information on the status of their accounts in order to check whether the next transaction is feasible or not.

Open banking can be used to consolidate the status of various accounts in a single application thanks to Account Information Services (AIS). Such services are regulated in the PSD2 regulation at European level.

The Accounts PSD2 API allows users to check the information about their accounts, in a fully secure environment that complies with all the legal requirements established at European level. This gives customers a global overview of their finances and an easy way of analyzing their activity on the same platform used for FOREX transactions.

Open banking as a paradigm for a new way to trade FOREX

Open banking has created a host of opportunities for companies that until recently seemed unthinkable. There are already some success stories of APIs being used on third party platforms, which have integrated banking operations into their business processes, such as with Uber in Mexico.

This paradigm shift is also happening with FOREX companies. They are in a position to integrate open banking into their service offerings, providing a new user experience that is much more agile, faster and adapted to the needs of each company.

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