Tag: ECNs

ECNs

Multi-Dealer Liquidity on the Rise

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

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.

And Finally…

If you ever wanted an example of how an enhanced market structure – specifically around electronic trading – helps to build volumes, one need look no further than NDFs. Volumes have been climbing steadily over the past five years, indeed I am starting to think they may eclipse FX options soon, and how people trade them also appears to be shifting, to the degree that I wonder if the NDF market is giving us a glimpse into the market structure of the foreseeable future?

Some Initial Thoughts on the 360T/GTX Deal….

So the big news this week was that 360T has agreed to buy the GTX ECN for $100 million. This is obviously an interesting deal in a number of ways, and here are some of my initial thoughts.

Firstly, let’s look at the price per $1 billion of spot FX average daily volume (ADV).

We did a very rudimentary analysis of this when Deutsche Börse announced the purchase of 360T back in 2015 and found that it paid about $11.36 million per $1 billion dollars of spot FX ADV, compared to about $12.7 million per $1 billion of ADV paid by then-BATS Global Markets for Hotspot.

Not Necessarily Consolidation But…

There isn’t much left up for grabs, but 2018 will see a deal in the platform world, says Colin Lambert.

In all the history of the Profit & Loss Crystal Ball, platform consolidation has been the most fertile ground…..mainly for critics! If viewed in terms of the number of deals, however, the story is a little different.

The headline has been in demand from exchange groups for an OTC presence, culminating in deals for Hotspot, 360T and Fastmatch, and it is hard not to see this continuing – in spite of CME finally deciding to do something about further penetrating the OTC space by launching a service itself rather than entering partnerships.

The Great Divide

Colin Lambert believes data will become a commodity and will generate a divide between the “haves” and the “have nots”.

There is little doubt that data drives most things in foreign exchange. Pricing is the obvious area, but client business is now also analysed to great depth as service providers seek to more clearly define the value they extract from their franchises. Throw in operating metrics as well as reporting, and data permeates just about every part of the business.

Platforms Volumes Show Sizable September Boost

The first four platform providers to publish FX average daily volume (ADV) for September have all reported significant month-on-month (MoM) and year-on-year (YoY) increases.

FXSpotStream’s ADV for September was $23.9 billion, which represents its highest ever monthly ADV since the service was founded nearly six years ago. It is also a 24.6% MoM increase and a 54.9% YoY increase in ADV.

The record setting volume in September caps a newsworthy month for FXSpotStream, as it revealed exclusively to Profit & Loss that it has added State Street as its 13th liquidity provider, has hired a new CTO and is planning to launch a new analytics suite.

Exclusive: FXSpotStream Announces New LP, CTO, Analytics Suite

FXSpotStream has onboarded State Street as the latest liquidity provider to its service, hired a new CTO and revealed plans to make a new analytics suite available to its liquidity providing banks and clients.

State Street becomes the 13th bank to go live as a liquidity provider on FXSpotStream’s price aggregation service, after Bank of Tokyo-Mitsubishi UFJ (BTMU) was added in December 2015.

“We know from client requests that liquidity from State Street will be a welcome addition to FXSpotStream’s existing bank liquidity.  Our service provides State Street an expanded e-distribution network through our global connectivity network and client base.  With co-location sites in New York, Tokyo and London, clients can use either our GUI or single API connection to access State Street’s liquidity,” Alan Schwarz, CEO of FXSpotStream, tells Profit & Loss.

The FX Tape, What’s Different This Time Round?

The consolidated tape for FX launched by FastMatch today looks very different to the one initially proposed by its CEO, Dmitri Galinov. Galen Stops takes a look at what’s changed.

FastMatch has today announced plans to launch a consolidated tape for FX, something that its CEO, Dmitri Galinov, has been working towards for some time.

Profit & Loss previously reported on an earlier proposed iteration of this tape back in May 2016, but the one launched today looks significantly different.

The Reality Check

Much has been made of the sharp drop in spot FX volumes in the recent BIS Turnover Survey, but, Colin Lambert asks, is what we are seeing merely a return to a longer term trend?

A regular theme in Profit & Loss over the past two years has been, since the traumatic events of January 15, 2015 around the Swiss franc peg, the return to relationship trading at the expense of the all-to-all model.

Analysis and data recently released by the Bank for International Settlements based upon its recent Triennial Central Bank Survey of FX Turnover appears to support the notion that the FX market is losing its infatuation with market share at all costs and is much more choosy about who it deals with.