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Where next for FX?

FX-MM, July 2013 - Recent research published by Aite Group has provided some interesting insights into the trajectory of the global FX market, not least what it will take for venues to remain competitive. We speak to David Mercer, CEO, LMAX Exchange, to get his views on the future of FX.

FX-MM: Broadly speaking, what do the next five years hold for the FX market’s growth prospects do you think?

DM: FX is only going to go north of here. Aite Group’s ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’ report predicts that the spot FX market will reach US$2.2 billion in daily turnover by 2016, up 35% from 2010 levels. I personally think that may be a little conservative and I’d actually expect us to see as much as 50% growth in the next 3-4 years.

Overall, growth is going to be driven by certain geographies, including Eastern Europe and Asia Pacific. As an industry, I don’t think we’ve even really scratched the surface of the market in Asia – everyone knows about Japan and its percentage share but I imagine that there will be a lot of growth from countries such as India, too. China is a slightly grey area because of its regulatory regime, but we are seeing a great deal of interest from the Chinese territories. The advent of mobile technology makes these geog raphies far more accessible, as we have seen in Africa, for example.

In short, the historic FX hubs are going to shift away from the Western World – whether that happens in the next three years, or the next ten years, only time will tell. Another driver of growth is traders from other asset classes starting to trade FX. Historically, FX was not regarded as its own asset class – it was simply something that needed to be done for hedging purposes or revenue conversion, for example. We’re still in a very low interest rate environment and this means that FX has become a credit-driven market. So we’re now seeing fund and asset managers who traditionally used equities, futures and indices, looking at FX as a way to put their credit strategies in play.

FX-MM: How are client requirements and behaviours changing as a result of this?

DM: If you trade equities, futures, or indices right now, you’re used to trading on exchange, with an open order book. You see the price and see you the depth. With FX, there is not only a plethora of venues, but the pricing varies according to relationships, too. Then you have the ‘last look’ concept where the price provider has the ability to reject certain trades if the price has moved by the time it gets to the trade server.

LMAX Exchange is the only venue, apart from those in the inter-bank space, where there is no ‘last look’ as standard. This means that there are no re-quotes or rejections and the client receives a much smoother, better quality execution, as you would expect in other asset classes – the price you see is the price you get.

Outside of clients from other asset classes, there are changes taking place in the typical FX client profile as well: traders are able to access more and more products; their models are getting increasingly smart; and they have quicker, better access to market data and information. There is also a much higher incidence of clients – from retail through to institutional – using algo trading in order to obtain ‘best execution’.

Elsewhere, clients are becoming much more demanding, and rightly so, around service levels and accessibility. So to remain competitive, providers need to offer flexibility and a range of access channels. For instance, you can access LMAX Exchange via three different APIs; via our own UI, three (soon to be four) third party UIs; and we cater to all of the mobile applications and platforms.

FX-MM: Were there any surprising statistics or trends coming out of the Aite Group report?

DM: One of the very surprising things for me was the balance between the growth of algo execution and the percentage of the FX market that is still voice-broked or RFQ. Of course there are some reasons behind this, but I think that the evolution towards electronic trading will continue across all FX instruments.

Another interesting debate sparked by the report is ‘what is high frequency trading’? It seems to get a bad name and I’m not sure that everything that is put in the HFT bracket is necessarily to the market’s detriment.

Is algorithmic trading a sub-set of HFT or vice versa? Is there really much difference between the behaviour of HFTs and banks? These are interesting questions that I don’t believe have been properly addressed as yet.

Finally, I was amazed to discover from the report that some of the primary venues for price discovery send out so little market data, or so few price updates, in a modern world that can certainly accommodate more. Sending out updates every 100 milliseconds does not constitute real-time. At LMAX Exchange, real-time means real-time!

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Media Contacts

For further information please contact:

LMAX Exchange (London):
Barbara Pozdorovkina T: +44 20 3192 2510 E:

About the LMAX Exchange Group

LMAX Exchange Group is a global, high-growth financial technology company that is leading the transformation of the global FX industry to transparent, fair, precise and consistent execution. Operating global exchanges for trading FX, metals, indices, commodities and crypto currencies, LMAX Exchange Group delivers open access, transparency and level playing field to all market participants.

LMAX Exchange Group offers all clients the ability to trade on the LMAX Exchange central limit order book, driven by streaming no ‘last look’ limit-order liquidity from top tier banks and non-bank financial institutions. Servicing funds, banks, brokerages, asset managers and proprietary trading firms, LMAX Exchange Group offers an anonymous, regulated, rules-based trading environment, order execution in strict price/time priority, and access to real-time streaming market and trade data, enabling all market participants to control execution quality and total trading costs.

Offering a comprehensive range of instruments and ultra-low latency execution, LMAX Exchange Group operates a global FX exchange infrastructure with matching engines in London, New York and Tokyo.

LMAX Exchange Group - a unique vision for global FX.

Financial technology awards:

2017 Best FX Trading Venue - (ECN/MTF) – Fund Technology and WSL Awards more

LMAX Exchange has been awarded The Fund Technology and WSL Awards “Best FX Trading Venue - ECN/MTF”. The award honours excellence among providers to the institutional trading industry. close

2016 Best Trading & Execution Technology – HFM US Technology Awards more

The HFM US Technology awards recognise hedge fund technology providers that have demonstrated exceptional customer service and innovative product development in the past 12 months. close

2013 Best Overall Testing Project – The European Software Testing Awards more

The European Software Testing Awards (TESTA) recognise excellence and innovation in the software testing and quality assurance across a variety of industries. close

2011 Best Trading System – Financial Sector Technology Awards more

The FST Awards recognise excellence and innovation in the field of information technology within the UK and EMEA financial services sector. close

2011 Innovative Programming Framework – Oracle Duke's Choice Awards more

Oracle’s Duke's Choice Awards celebrate extreme innovation in the world of Java technology and are granted to the most innovative projects using the Java platform. close

FX industry awards:

2017, 2016, 2015, 2014, 2013 Best FX Trading Venue - (ECN/MTF) – WSL Awards more

LMAX Exchange has been awarded The WSL Awards “Best FX Trading Venue - ECN/MTF” for four consecutive years. The awards honour excellence among providers to the institutional trading industry. close

2017, 2016, 2015, 2014, 2013 Best Margin Sector Platform – Profit & Loss Readers' Choice Awards more

LMAX Exchange has been awarded The Profit & Loss Readers’ Choice Awards “Best Margin Sector Platform” for five consecutive years. These awards are voted on by the readers and recognise excellence within the foreign exchange industry throughout the previous year. close

2017, 2013 Best Execution Venue – Forex Magnates Awards more

LMAX Exchange has been awarded the Forex Magnates Awards “Best Execution Venue”. The awards are granted to the top firms in their categories and announced at the annual London summit. close

2014 Best Infrastructure/Technology Initiative – WSL Institutional Trading Awards more

LMAX Exchange has been awarded The Wall Street Letter Institutional Trading Awards “Best Infrastructure/Technology Initiative” in 2014. WSL awards honour excellence among providers to the institutional trading industry. close

Business growth awards:

2016, 2015 Winner – Deloitte UK Technology Fast 50 more

Deloitte UK Technology Fast 50 is a ranking of the 50 fastest-growing technology companies in the UK, based on percentage growth of fiscal year revenues over the last four years. close

2016, 2015 Winner – Deloitte EMEA Technology Fast 500 more

The Deloitte EMEA Technology Fast 500 pre-eminent technology awards program is a ranking of Europe, the Middle East, and Africa's fastest-growing technology companies based on percentage revenue growth over three years. close

2015, 2014, 2013 Fastest Growing Tech Company in the UK – The Sunday Times Tech Track 100 more

LMAX Exchange has been recognised amongst the UK’s fastest growing technology firms for three consecutive years. Tech Track 100, compiled by Fast Track annually and published by the Sunday Times each September, lists Britain’s 100 fastest-growing private tech companies based on sales growth over the last three years. close

2015 Recognised as a Tech City Future Fifty company – Tech City UK Future Fiftymore

LMAX Exchange is part of the Future Fifty programme, focused on accelerating the success of high-growth tech businesses. close

LMAX Exchange Group is the holding company of LMAX Limited and LMAX Broker Limited.

LMAX Exchange is a trading name of LMAX Limited, which operates a multilateral trading facility, authorised and regulated by the Financial Conduct Authority (firm reference number 509778) and is a company registered in England and Wales (number 6505809).

LMAX Global is a trading name of LMAX Broker Limited which is authorised and regulated by the Financial Conduct Authority (firm reference number 783200) and is a company registered in England and Wales (number 10819525).