How to Manage Dynamic Commission Rate For Multi Trade Source And Asset Classes
For every Buy or Sell brokerage transaction, a rate known as a Commission is charged for the services being provided for the client, as customers have to execute their trades using only professional services of brokers. For every transaction performed, a broker can apply various commission incentives to encourage customers to trade in volumes and based on the default implementation configured on the system, when a customer reaches an important transaction turnover point, the broker could revise the default commission that may apply (e.g. Commission rate of 1.35%) to a more favourable rate for the client.
With the advent of online digital trading, brokers try to implement various concession trade rates to encourage online trading for customers using mobile or the web as self-services tools. However in implementing this process, brokers have encountered a lot of challenges while managing customers routing trade through the platform.
Brokers observed, despite proving the online mechanism that most customers still prefer to engage the direct professional services of these same brokers for trade execution. As a result of switching between commission groupings for some customers at the back-office, it could be found that when the broker takes on the transaction for a customer, an income leakage is inevitable due to the agreed incentive. Their full brokerage commission is not earned when the back-office still has to process a client trade request like that.
As a solution to the above scenario, InfoWARE now provides a dynamic commission rate management system for Multi trade Source and Asset Classes.
This feature allows Brokers to be able configure different commission rates based on the origination of trades either Online or Back-office with different configurations on either Buy or Sell Transactions. Also the graduated commission capability creates a system where customers who trade in volume transactions pay less when those volume conditions are met.
At the backend, the commission rate is configured on the platform (buy/sell online or back office) and this allows the brokers to create an interesting incentive commission scheme that will encourage customers to trade online or in-house. The users will be able to take advantage of the configured rate and the online self-service via the portal without having to make any adjustments on the system as it ensures to take cognizance of the rates already configured on both ends respectively.
On the brokerage side, there are various incentives which can be translated to commission rates allowing you to apply various discounts to multiple/different asset classes. This automated capability gives you the abilities to segment your offerings.
WORKFLOW ON CONFIGURING MULTI SOURCE RATE AND GRADUATED COMMISSION RATES ON INFOWARE
- Commission rates are decided on both back end and online trading platforms
- Create concession groups to manage various categories of customers
- Decide how many asset classes to implement
- Configure the back-office and online trading rate
- Assign customers to this group for the system to keep track of the various customer groups.
- Prevents and manages concession rate for customers based on asset classes
- Allows to create an incentive scheme for online trade
- Prevents income leakages for trade execution
- Opportunities to create graduated commission rate to encourage online trade.
In conclusion, understanding the configuration depth of the system helps in creation of an efficient rate management scheme that allows users increase the online trading volume by creating an appropriate incentive scheme which at the same time been able to create multiple concession group and trade source for different asset classes.
Having this configuration on InfoWARE, users can create the appropriate incentive for customers using both platforms by adequately managing the revenue of professional services provided for trade execution.
Should you require additional information about this implementation and how it can be leveraged on,
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