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FX Volumes Dip In February

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Anecdotal evidence that February was a much quieter month for FX markets is reinforced by the first set of average daily volume (ADV) data reported by FX trading venues with all showing a month-on-month decline and only one a year-on-year rise.
FXSpotStream reports ADV of $34.8 billion in February, down 9.4% from January, but up 20.8% from February 2018.
Elsewhere, CboeFX says it handled $34.5 billion per day last month, a 4.2% decline month-on-month and a 21.9% decline from February 2018 – a month in which the platform set its highest ADV to date at $44.2 billion.
Finally in the first group to report data, Euronext’s FastmatchFX says it handled $18.1 billion per day in February, down 9.5% month-on-month and down 14.2% year-on-year. The FastmatchFX Tape also saw a month-on-month decline at $64.5 billion of notional value reported, this is down 3.4% from January, but still reflects a very healthy year-on-year increase from what was its second month of reporting in February 2018 when it handled $26.6 billion.
Fastmatch volumes are for spot FX products only, while CboeFX is spot and NDFs and FXSpotStream data is for all FX products, including FX swaps.

Multi-Dealer Liquidity on the Rise

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Although the latest FX committee turnover data hold no terrors for other channels, a longer term trend does seem to be confirmed that more volume is heading towards the multi-dealer model, especially those on a disclosed basis. Colin Lambert takes a look.The historically clichéd method for a customer to execute an FX hedge was to call three or four banks and ask for a price. Surprisingly, even as relatively recently as late 2017 customers were still telling Profit & Loss and other industry surveys that they still preferred to pick up the phone, but more recent data suggest this is no longer the case and that customers are moving to the e-channel for their FX needs.

Multi-Dealer Liquidity on the Rise

Posted on by

Although the latest FX committee turnover data hold no terrors for other channels, a longer term trend does seem to be confirmed that more volume is heading towards the multi-dealer model, especially those on a disclosed basis. Colin Lambert takes a look.The historically clichéd method for a customer to execute an FX hedge was to call three or four banks and ask for a price. Surprisingly, even as relatively recently as late 2017 customers were still telling Profit & Loss and other industry surveys that they still preferred to pick up the phone, but more recent data suggest this is no longer the case and that customers are moving to the e-channel for their FX needs.

A Rising Tide Lifts All

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If the numbers are anything to go by, 2018 was a good year for OTC FX platforms, says Galen Stops.2018 saw the spot volumes increase across all of the multidealer OTC FX platforms that report this data, something that has not happened once in the past five years. Talk to the platform providers about what they saw as the key drivers of trading volumes in 2018 and they largely cite the same factors, chief amongst these being a proper decoupling of US interest rates relative to the rest of the world.

Cboe FX: Driven by Data

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In terms of volumes, Cboe FX indisputably had a great year in 2018. It’s average daily volume for the year was $37.4 billion, it’s highest ever recorded and a 27% increase from 2017. Breaking down this figure further, the ADV on the London matching engine doubled, there was a 35% increase in trading activity during European or Asian hours, CNH trading on the platform doubled to become the sixth most actively traded currency on the platform and there was good growth in its full amount offering which accounted for $3.5 billion in Q4 of 2018, up 600% year-on-year. Discussing what prompted such an uptick in trading activity, senior staff at Cboe FX point to investments in technology and infrastructure that occurred in 2017, in addition to the fact that the full amount platform was re-built in 2018.

Mixed Results from FX Platforms to Kick Off 2019

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While the results from the first three platforms to report FX turnover data are all up from December, the year-on-year comparison is more mixed, with FXSpotStream hitting another peak for the service, but CboeFX and FastmatchFX both falling back.
FXSpotStream reports average daily volume (ADV) of $38.4 billion in all FX products, while CboeFX handled $36 billion per day of spot and FastmatchFX saw a daily average of $20 billion transacted on its platform. The Fastmatch Tape saw a decline for the second month in a row, however.

Platform Data Confirms Decent December

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Data from a second group of platform providers has reinforced the message from the first two releases that while it didn’t pull up too many trees, December 2018 was a solid month for most that ended a good year. All providers reporting increased activity in the whole of 2018 compared to 2017. There was a more mixed message in the month-on-month data with only three providers reporting an increase from November, but the year-on-year data generally speaking gave grounds for optimism amongst providers.

December FX Volumes Hold Up

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Data from CboeFX and Fastmatch indicate that while there was an inevitable drop from November, FX activity in December was historically robust.
CboeFX, formerly HotspotFX, reports average daily volume (ADV) of $33.4 billion in December, 4.3% lower than November, but up 7.4% from December 2017. CboeFX data is based upon 21 trading days, it was open in Asia on December 25, but it was not even the quietest month in the year for the platform, that marker going to July at $33.2 billion.
Meanwhile, Euronext’s FastmatchFX report ADV of $19.1 billion, down 5.9% on the month but again up on the year – by 22.4%. Fastmatch data is based upon 20 trading days.

In the FICC of It

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It may be his life-threatening illness (slight cold) but Colin Lambert is in punchy form in this week’s In the FICC of It podcast, so listen in as he and Galen Stops discuss a busy week in the FICC world.
Starting with the potential implications of Cboe’s agreement with UBS to help broaden the reach of its FX platform – and why Refinitiv might want to sit up and pay attention – they rampage through the multi-dealer platform world looking at how (if according to Lambert) platforms can differentiate themselves. Are these firms really taking the single dealer model and deploying it in a multi-dealer landscape? Will this work? What are the USPs of a single and multi-dealer platform?

And Finally…

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A couple of months ago I wrote a piece highlighting what I suggested was the first signal of a real shift away from anonymous trading toward disclosed. The column received, as is usual I should point out, a mixed response, with several of you pointing out that without the anonymous pools of liquidity price discovery would be severely hampered and liquidity would dry up. Back then, I used FX Committee data for the basis of my argument, but now it looks as though the platforms are providing the ammunition.

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