When Citi took the drastic step of severing 90% of its relationships with various spot FX vendors in 2020, many expected this to lead to an industry-wide culling of platforms by banks.
Until now, dealers have been willing to connect to whatever platform their customers demand, but this has largely been due to reluctance. The increased brokerage fees charged by these exchanges and the costs of connecting to a myriad of services have led to fierce pushback from some banks seeking to persuade buy-side customers to trade on fewer platforms. Instead, it uses its own single-dealer platform.
Additionally, liquidity has been fragmented for years due to so many spot trading venues that many believed that the platforms would eventually consolidate.
But rather than looking, FX Vendors are closing their doors and a growing number of interbank platforms, dark pool matching platforms, liquidity aggregators, and buy-side execution management systems are rapidly setting up shop.
Since the City’s decision, T.P. Icap launched electronic spot FX While matching venues compete with primary venues, reactive markets are building a roster of liquidity providers as competitors. FX spot stream. Last year also saw the launch of Singapore Exchange’s new electronic communications network (ECN) CurrencyNode for spot and non-deliverable forward trading in Asia Pacific, Refinitiv plans to launch its own interbank exchange/secondary trading ECN After replatforming in 2024.
The latest entrant is an Abu Dhabi-based vendor T3 Technologies has introduced a centralized limit order book that also facilitates peer-to-peer trading.
Some estimate that the number of FX There may now be more than 75 trading venues available to businesses, and potentially even more as specialist fintech companies. APIBased Trading and Artificial Intelligence seeks to extend its solutions into the following areas: FX.
Customers therefore have more choice than ever before regarding the liquidity pools they access. The problem lies with the dealer. The problem is that the fragmentation of the liquidity pool will only slowly accelerate, and with so many new vendors emerging, trying to absorb them could be difficult for some dealers. That’s true.
Speaking by Andrew Houser of the Bank of England in 2019, he put into context the cost of maintaining this platform’s network. Referring to the blog post of XTX As for the market’s computing power (it was said at the time to have access to 42 petabytes of data storage), Hauser said it would cost Amazon Web Services about $10 million a year at basic standard rates. Ta.
sophisticated companies like XTXFirms with the resources to connect to various liquidity pools and derive optimal responses in real time can easily take on such costs, while others lack the funds available to do so. I only have a part of it.
This could lead to further venue selection as dealers only connect to the platforms they deem necessary for their end clients. There is also likely to be an increased reliance on trading cost analysis providers, who can show liquidity providers and buy-side customers which platforms are most efficient to trade on.
For the new platform itself, while it may see sufficient trading volumes during periods of high volatility, maintaining its activity during periods of market calm will be a challenge.
However, it is true that technology has made it easier to launch platforms, increasing the dominance of spot electronic trading. FX We may see new types of venues for other instruments as well. FX option.
So, is it possible that there will be 100 platforms in operation in five years? Quite possible. Will they all be successful? I doubt it.