Month: December 2015

How Do I Forecast Volume Based Revenue Generation?

by fscala fscala No Comments

The ability to accurately forecast revenues is a crucial tool in identifying targets for success.  Brokerages that utilize a Straight Through Processing (STP) model may calculate volume-based revenues related to total client deposits, estimated monthly trading volumes, and round turn markups.  As the number of clients increase, total deposits, trading volume, and subsequently revenues will also increase.


Consider the following example:


Total client equity deposits = USD $100,000

Estimated Monthly Trading Volumes = 500 times total equity deposit

Markup per trade = 2 pips (or $200 per million)


Using these assumptions, a brokerage can generate $10,000 revenue per month (Monthly Revenue = Total Equity Deposit * Monthly volume turnover * # pips).  The more accurate your assumptions, the better your forecasting will represent the brokerage’s ability to make profits.

This model demonstrates potential profits based on overall deposits and client trading volumes.  The better understanding of your clients’ trading activity and behavior, the more accurate your model will be.  Revenues are generated on each and every trade, regardless of price movement.  By eliminating dealing desk risk with STP trading, you can estimate revenues to help make decisions about future investments, marketing budgets, and even consider starting your own FX brokerage.