e-FX adoption seen accelerating (partly due to FX fixing problems)


The migration of foreign exchange trading from voice to electronic based trading has been gathering pace over the past few years.

Whilst exact e-FX ratios vary between banks, products, client segment and regions, recent research puts the e-FX ratio at anywhere between 50-70% of global totals (Greenwich Associates-70% and Aite Group -60%, and Bank of International Settlements at 50%)

Interestingly the adoption rate of e-FX is expected to accelerate as banks, in response to the ongoing investigations into irregularities around the FX fixing business (where traders are alleged to have colluded by sharing details of client order books) look to reduce the use of voice trading and migrate more flow over to the eFX channels.

There is much debate around how to ‘fix’ The Fix, including greater use of agency based algorithmic execution over a longer period of time, rather than the current limited ‘fixing window’, and some talk about moving to an exchange type model.

The FT has an article today talking about the migration to e-FX, and what was interesting for me was that for the first time, seeing actual bank FX volumes and their eFX ratios, which usually aren’t made available on a named basis, so below are some of the more interesting statistics.Here is the graphic from the FT article, and below some analysis of the data.

FT insert on FX volumes

 

The chart below shows the e-FX ratios from the above graphic, in 2010 and 2013 for the top ten global FX banks. As we can see from the dotted lines, the average e-FX ratio amongst the top ten banks has increased from 25% (dotted black line) in 2010 to 46% (dotted red line) in 2013.

What is striking is that whilst Barclays was already doing 47% of all their FX electronically in 2010, RBS was only doing 8% of their FX electronically. Whereas in 2013, whilst Barclays has only managed to increase that ratio from 47% to 50%, RBS has increased it from only 8% to 43% of their FX being traded electronically.

e-FX as Pct of all flow for top FX banksChart shows e-FX ratios as percentage of total FX for the top ten global etrading banks and changes between 2010 and 2013 (EuroMoney)

The chart below shows the pct change in e-FX ratio for the top ten banks between 2010 and 2013. As can be seen with RBS, the pct of their FX that has migrated to e-FX has increased a whopping 511% in the past three years.

Pct change in e-FX ratios Chart above shows percentage change in e-FX ratios for the top ten global etrading banks between 2010 and 2013 (EuroMoney)

The actual FX volumes for the banks are as follows:

FX Vols of top banks ($tn per month)

FT article here

6 Responses

  1. why FT’s article only shows 1st picture , where did you get the rest 3 pictures ? thanks

  2. Hi, I made the other two myself – good aren’t they!

    Paul

  3. […] this week I looked at how the adoption of eFX was accelerating and commented on the huge increase in the e-FX ratios at RBS in particular, which has risen from 8% […]

  4. Hi ,

    Why the amount is not total FX volume of each bankeFX, but eFX’s ? Any clue ? Thanks

  5. Opps, I mean Why the amount is not total FX volume of each bank, but eFX’s only ? Any clue

  6. Hi Mike,

    They were looking at the eFX ratios. But if you take the $$volume and divide by the e-FX ratio, you do get the total volume, which is what I have shown in the spreadsheet table.

    The FT graphic doesn’t show over what time period the $ volumes relate.

    They can’t be annual as that would mean very small daily volumes, so I have assumed it’s for one month. Plus that agrees with daily volume figures of various discussions we have had with banks.

    Regards

    PAul

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