Synthetic indices for brokers
Synthetic indices are instruments a broker prices itself instead of taking from an LP. Some are built from real prices, like a cross or a basket. Others are generated: volatility, boom and crash style indices with their own random price series that run around the clock. Both can stream to MT5 next to your FX and metals.
Two kinds of synthetic instrument
They look the same on a client’s chart and work very differently behind it.
Formula symbols
Built from prices you already receive: EURUSD × USDNOK gives EURNOK, gold divided by EURUSD gives gold in euro, and a basket or dollar index is one formula. They follow the real market and close when it closes.
Generated indices
Need no LP at all. Each runs its own random series with a set behaviour, such as steady volatility or sudden spikes, and can trade every day of the week. The broker is always the counterparty.
Common generated families
Each family is a different kind of movement. Most brokers offer a few versions of each, at different volatility.
- VolatilityHow it moves:A steady random walk at a set yearly volatilityOften used for:The core range: low, medium and high volatility versions
- BoomHow it moves:Small drift down with sudden spikes upOften used for:Clients trading for the spike
- CrashHow it moves:Small drift up with sudden spikes downOften used for:The mirror of boom
- StepHow it moves:Exactly one step up or down every tickOften used for:Simple, predictable sizing
- JumpHow it moves:A random walk with occasional large jumpsOften used for:Event-style moves without real news
- Range breakHow it moves:Holds inside a band, then breaks outOften used for:Breakout strategies
- Mean reversionHow it moves:Pulled back towards its averageOften used for:Range strategies
- Regime switchHow it moves:Alternates between trending and rangingOften used for:Testing how strategies adapt
How synthetic prices should be built
The rules that keep a synthetic honest and keep it from being gamed.
Bid and ask from the legs
A formula symbol takes its bid from the legs’ bids and its ask from their asks, so it is never tighter than the real market allows.
A spread you choose
Keep the spread that falls out of the legs, set a fixed one, or hold it between a minimum and maximum.
No frozen prices
If one leg goes stale, the symbol waits instead of publishing a price that no longer reflects the market.
Spread that covers the move
For generated indices, the spread should cover the typical move per tick, or the instrument can be gamed.
Keeping generated indices fair
Clients trade against your series, so you need to show it is random and that you did not touch it.
Unpredictable series
Each generated instrument runs from a random seed that clients never see, so its next tick cannot be worked out from the last.
Replayable for disputes
The seed and run number replay the exact series, so you can show a client precisely what the price did.
Changes on record
Settings changes, pauses and resets are written to an audit log with who made them and when.
Measured, not assumed
Track the real tick rate, volatility, spikes and spread against the settings, every hour and every day.
Setting them up
In this order, starting with the question that decides whether you can offer them at all.
- 01
Check your licence
Generated indices have no outside market, so the broker is always the counterparty. Confirm your licence allows it and how you must disclose it.
- 02
Pick the instruments
Crosses and baskets from your existing feed, generated families, or both. Start with a small range.
- 03
Set behaviour and spread
Start price, tick rate, volatility or spike settings, and a spread that covers the typical move.
- 04
Stream them to MT5
Map the new symbols to your MT5 server like any other, and set contract size, margin and hours in MT5.
- 05
Run them on demo
Watch at least a week of stats on a demo server and look for strategies that exploit the series.
- 06
Publish the rules
Explain how the indices are produced, that they do not follow a real market, and how disputes are settled.
Because generated indices are always B-book, read A-book vs B-book vs hybrid on managing that risk, and the synthetics docs for every setting.
In XiroLink
Synthetics priced by the bridge
XiroLink builds formula symbols with a live preview and a cross finder, and runs eleven generated families from volatility to regime switch. Each generated instrument has an admin-only seed you can replay, stats on its real behaviour and a full audit trail.
Synthetics stream to MT5 and MT4 like any other symbol, with your markups. They are included from the Professional plan, or as an add-on to Standard.
Synthetic index questions
What are synthetic indices?
Instruments a broker prices itself instead of taking from an LP. Some are built from real prices, such as crosses and baskets. Others are generated, such as volatility, boom and crash style indices, with their own random price series.
Can I offer synthetic indices on MT5?
Yes. To MetaTrader 5 they are ordinary symbols arriving through a datafeed. You set contract size, margin and trading hours in MT5 as for any other symbol.
Who is the counterparty on a generated index?
The broker. A generated index has no outside market to pass trades to, so every position is effectively B-book. Price and size them with that in mind.
Are synthetic indices allowed?
It depends on your licence and jurisdiction. Some regulators restrict them or require specific disclosure, so check before you list them.
Can clients predict a generated index?
Not if it is generated properly: each series runs from a random seed that only admins can see. Keeping the spread above the typical move per tick also stops strategies that try to scalp the generator.