A major European broker successfully eliminated arbitrage trading and saved $2.3 million annually using the VELES intelligent detection system. This case study examines their journey and the remarkable results achieved.
Client Background
Our client, one of Europe's leading forex brokers, manages over 50,000 active accounts and processes $5 billion in monthly trading volume. Prior to VELES implementation, they were experiencing significant losses from sophisticated arbitrage strategies.
The Challenge
The broker faced multiple interconnected challenges:
- Monthly losses exceeding $200,000 from latency arbitrage
- Inability to detect coordinated multi-account schemes
- False positive rates above 40% with existing systems
- Manual review processes consuming 120+ hours weekly
Solution Implementation
Phase 1: Assessment and Planning (Week 1-2)
Our team conducted a comprehensive analysis:
- Historical transaction analysis covering 6 months
- Identification of 147 suspected arbitrage accounts
- Mapping of existing detection gaps
- Custom configuration requirements gathering
Phase 2: Integration and Configuration (Week 3-4)
VELES was integrated with the broker's infrastructure:
- MT5 Manager API integration completed in 3 days
- Custom detection rules configured for specific instruments
- Real-time monitoring dashboard deployment
- Staff training on system operation
Phase 3: Optimization and Tuning (Week 5-8)
Fine-tuning based on live data:
- ML models trained on broker-specific patterns
- Threshold adjustments to minimize false positives
- Automated response actions configured
- Integration with existing CRM and back-office systems
Results
Immediate Impact (First 30 Days)
- Detected and prevented 89 arbitrage attempts
- Identified 23 previously unknown coordinated account groups
- Reduced false positive rate to 8%
- Saved $340,000 in prevented losses
Long-term Results (12 Months)
After one year of VELES operation:
- 85% reduction in arbitrage-related losses
- $2.3 million in total prevented losses
- 93% decrease in manual review time
- ROI of 520% within first year
Key Success Factors
Advanced Detection Capabilities
VELES's multi-layered approach proved crucial:
- Pattern recognition across seemingly unrelated accounts
- Microsecond-level timestamp analysis
- Cross-venue price comparison
- Behavioral profiling and anomaly detection
Automated Response System
Automated actions significantly improved efficiency:
- Instant execution delays for suspected arbitrage trades
- Dynamic spread adjustments for flagged accounts
- Automatic account grouping and risk scoring
- Real-time alerts to dealing desk
Client Testimonial
"VELES transformed our approach to risk management. What impressed us most was not just the technology, but the team's deep understanding of our challenges. The system paid for itself within two months, and we now operate with confidence knowing we're protected against even the most sophisticated attacks."
- Chief Risk Officer
Lessons Learned
- Early detection is crucial - most arbitrage damage occurs within seconds
- Machine learning models require broker-specific training for optimal results
- Automated responses are essential for managing high-frequency attacks
- Regular model updates maintain detection effectiveness
Conclusion
This case demonstrates the transformative impact of intelligent risk management technology. By combining advanced detection algorithms with automated response capabilities, VELES enabled our client to virtually eliminate arbitrage losses while improving operational efficiency.
If your brokerage faces similar challenges, contact our team to discuss how VELES can deliver comparable results for your organization.