What will drive further adoption of electronic trading?

LMAX Exchange

Electronic trading execution methods (as defined by BIS) account for 55% of all spot trading, represented collectively by electronic broking (interbank), MDPs, and SDPs. Of the three electronic execution methods, interbank systems (i.e., EBS and Thomson Reuters) have one of the largest shares of the spot FX market, at 26%.

Retail aggregators do not appear on this execution venue list because they are counted as bank clients in this BIS survey. Inter-broker dealers like ICAP and Tradition capture 47% of FX swap business (voice broker plus inter-dealer direct percentages) as well as 35% of FX options volume.

When looking at electronic trading platforms, both single- and multibank platforms compete actively in two markets: FX spot and outright forward markets.

Volume by Execution Method

What will drive further adoption of electronictrading?

Source: BIS, Aite Group

Campbell Millar, LMAX Exchange CRO, shares his thoughts.

Source: Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013

Video Transcript

What will drive further adoption of electronic trading?

Campbell Miller: There are a number of reasons why we can expect electronic trading to make up a greater part of the spot FX market going forward. Firstly, we have developments such as the proliferation of FX venues which are all resulting in a much wider distribution of FX liquidity. Secondly it’s becoming increasingly easy for people to get access to these venues from mobile trading applications to multiple API’s to plug in multiple trading robots in to this liquidity. Thirdly, we have technology events, we have improvement in execution that these venues actually offer, we have advances in technology combining the new features of some of the venues such as no ‘last look’, which all results in better execution for the customer. I think electronic traders are best positioned to take advantage of these improvements in executions and also quite importantly the high frequency trades are still a growing part of the FX market, and I certainly expect that trend to continue. And fourthly, you get all these developments in terms of distribution improvements in technology all at the backdrop of what looks like a sustained increase in volatility in the FX market going forward and all of which will contribute to electronic trading gaining market share in the spot FX space.

Business and Technology   Aite Group   LMAX Exchange  

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