One of the strongest motivations for traders to switch to forex brokers is minimizing transaction costs. According to a 2023 statistic by Finance Magnates, for every 0.1 basis point (bp) reduction in spread, high-frequency strategies’ annualized return can increase by 1.8%. For example, on one day, when the traders moved from the brokers with an average spread of 1.5 basis points to the ECN platform of 0.8 basis points, the transaction cost for each day came down from 320 US dollars to 170 US dollars, amounting to over 55,000 US dollars saved annually. An example of such is that the cost per year of an institution increased by 1.2 million US dollars due to a change in commission rate (from 4 US dollars per lot to 6 US dollars), and then switched to LMAX Exchange, saving fees of as much as 27%.
Differences in order execution quality affect migration choices. The median forex Brokers’ execution speed under FCA regulation is 8 milliseconds (ms), while offshore platforms’ latency is around 120ms, which equates to large ranges in slippage charges. During the release of the 2022 non-farm payroll data, the highest scenario slippage of EUR/USD orders by a specific broker was 12 basis points (industry-compliant platforms average was 1.2 basis points), and the proportion of instances in which clients experienced single-day losses greater than 5% of their net account value was 18%. LMAX Exchange has a 94% customer retention rate (industry average: 72%) as 99.97% of orders are executed within 0.5ms.
Regulatory risk events trigger customer migration. In 2021, FXCM was fined 7 million US dollars by the CFTC for concealing conflicts of interest between market makers. Within a 30-day timeframe after the leak, clients’ withdrawals reached 23% of assets under management. Similarly, in 2023, a particular Cypriot forex broker saw its WikiFX risk rating decline to 2.3 points (on a scale of 10) due to its capital adequacy ratio dropping below regulator requirements, with a monthly client turnover rate reaching 41%. Among influenced traders whose accounts fall under the ESMA leverage limit (1:30 for retail), 37% moved to offshore or Australian regulatory platforms in order to be able to receive a 1:500 leverage, but the margin call probability rose from 9% to 34%.
Backward technical facilities force traders to switch. MetaQuotes statistics for 2023 show that the effectiveness of customer strategy development for forex Brokers has three times better efficiency, while user churn for platforms having only the classic MT4 language is 15% higher annually. For the example, a quantitative fund, due to the inability of the first broker to service a load of 3,000 Tick per second, used a platform that could service it. As a result, the strategy’s annualized return increased from 14% to 22%. The capacity to counter DDoS attacks has also become essential – one platform lost an average daily 0.7% of customers due to three outages (cumulative 18 hours) in 2022. The same group of users deserted 60% of the service providers when it offered a 99.99% uptime SLA in the following year.
The speed of response of customer care has a direct impact on retention. It was seen in a survey by J.D. Power shows that the percentage of customer satisfaction of forex Brokers that respond in ≤1 hour is 89%, and complaints from the platform with response times of more than 24 hours have increased by 45% annually. In 2022, Swissquote, a Swiss broker, saw its Asian customers increase from 12% to 28% due to multilingual customer support (including Chinese) and 7× 24-hour online support. On the other hand, there existed a single offshore platform with a customer churn rate of 9.7% within a month due to slow processing of withdrawals (with a lag of 5.3 days on average against 1.2 for industry-standard platforms), much more than the industry average of 2.4%.
The other features and product diversity are the cause of migration. Assets’ size of forex Brokers providing trading in cryptocurrencies clients increased by 35% annually (whereas traditional platforms had just 7%). For instance, eToro on-boarded over 200,000 clients in 2023 when it launched in excess of 50 stock CFDS. One arbitrage trader observed an increase of 19% in the profitability of his strategy after he changed because the gold/crude oil Spread Betting contracts were unavailable on the first platform. Regulatory arbitrage has also taken hold – 19% of clients of ESMA have migrated to Mauritius regulated platforms which facilitate high-frequency scalping, but with a 26% increase in fund security risk.
Metrics indicate that, on average, 2.7 years go by before a trader changes forex brokers, and the essential needs are the incessant optimization of fees (34%), execution quality (28%), regulatory safety (22%), and technological compatibility (16%). At the tool level, WikiFX’s broker comparison function has increased efficiency in migration decision-making by 60% through quantitative analysis of over 30 parameters (regulatory levels, spreads, and leverage), reducing the amount of time it takes for a user to filter out best platforms from 14 days to 3 hours.