Technology provider Dion Global Solutions has launched an automated RFQ system for the OTC FX options market.
The new module, part of Dion’s Dfferentia solution, captures each stage of the FX options workflow in one system, says the firm, adding that it “dramatically” reduces the time taken to place, price and execute an order. The technology can be white labelled and be an application within a single dealer platform.
The module provides consistent and transparent pricing of FX options and allows users to issue and respond rapidly to RFQs, the firm adds, noting that previously manual processes and relationships have been transformed into a fully automated RFQ network which delivers significant efficiency savings while facilitating compliance with global regulatory demands for transparency and auditability.
Rob Gray at Dion Global Solutions says, “The CFTC and the EU have made it clear that compliant trading of FX options is dependent on technology. The regulators’ spotlight remains very firmly focused on this sector, with Dodd Frank deadlines approaching fast and opportunities for regulatory arbitrage disappearing as other jurisdictions adopt similar measures. Firms face three underlying requirements: accurate pricing and valuations; efficient risk and portfolio management; and support for effective price discovery both for single trades and whole books of options. The Dfferentia platform provides exactly these capabilities.”
The RFQ module can be deployed by banks’ sales and trading desks, as well as their liquidity providers, agency brokers, buy-side traders, and their clients’ corporate treasury teams. “It closes the gap in the FX options trading workflow and means that for the first time, the trading lifecycle is completely automated for all FX options market participants,” the firm claims, noting that the solution automates all FX options including exotics and emerging markets, while other platforms focus on vanilla products, short dates and G10 currencies.
“Aside from regulatory concerns, all these participants should be positioning themselves to take advantage of an upswing in the markets,” Gray says. “We are already seeing an increase in volumes, and forward-looking businesses are ensuring they have the ability to scale operations to meet growth demands. We believe that electronic trading has become an imperative in FX options and that it can be done at a sensible price point. The time is ripe for a fully automated sophisticated yet user-friendly RFQ system.”