The anatomy of the global FX market (BIS research findings)


The Bank of International Settlements (BIS), has just released a in-depth analysis of the recently released 2013 Triennial FX Survey, looking at the changing structure of the FX market, and drawing some conclusions.

Some of this was covered in our recent coverage of the 2013 Triennial FX Survey, some of the key points of which are shown here, but worth reading the report in full.

  • Non-dealer financial institutions were the major drivers of FX turnover (much through the use of prime brokers)
  • The reporting dealer market, by contrast, has grown more slowly (partly due to internalisation of flow by top tier banks), and
  • Trading volume of non-financials (mostly corporates) has actually contracted
  • In today’s market structure, electronic trading dominates. It is the preferred trading channel, with a share above 50% for all customer segments.
  • Non-financial institutions mostly prefer direct contact with their relationship bank, either via the phone or via a single-bank platform.
  • Financial customers are less loyal to their dealer often trade either directly with dealers electronically direct electronic price streams), or indirectly via multi-bank platforms and electronic brokerage systems that were previously the exclusive venues of inter-dealer trading
  • Retail accounts for some 3.5-3.8% of daily FX volumes

The climb in FX turnover between 2010 and 2013 appears to have been mostly Continue reading

SEF registrations to date


With less than a month to go till the closing date for SEF registration (2nd October), we have another two platforms, both Inter-Dealer Brokers (IDBs) Tullet-Prebon and ICAP submitting their SEF applications. Update with Tradition applying for SEF status on 9th Sept.

This brings the total to date to 15 platforms which are: Continue reading

Is FX heading for Equity style ‘All-2-All’ market?


Latest research from GreySpark looks at the regulatory and structural changes that are impacting the global FX market, and draws some interesting conclusions.

The report Trends in FX Trading 2013 (which I haven’t seen, other than in abstract here) looks at the evolution of market structure and reasons behind the decline in dominance of the wholesale dealer-dealer platforms (D2D), and the rise in importance of the dealer-client (D2C) platforms, both Single-Dealer Platforms (SDP) and Multi-Dealer Platforms (MDP).

From what I can see, the paper draws the conclusion that these trends will lead to the development of an equity style All-to-All (A2A) market structure, presumably characterised by central limit order books (CLOBs). Possibly driven by regulation and capital efficiency needs, making it less attractive for banks to market make, although not sure that should follow?

As the abstract from the report states: Continue reading

The Law of Unintended Consequences – example [insert large number here]


I have been following the Basel III regulations for some time. As always with regulation of this breadth & importance, there is lot to discuss but it seems there has been an immediate impact on funding for the “real” economy, i.e., project and trade finance. Continue reading

FX profitability across Client Segments


I have been reading some excellent research by ClientKnowledge, which compared bank FX profitability across client segments and geographic regions between 2009 and 2010.

So much great information contained in this chart.

Continue reading

Will top FX banks continue to lose market share to regional banks


The FX technology arms race continues unabated, with the top banks jockeying for position in the global FX rankings.

Leading banks in the global FX business are highly innovative, with a deep understanding of their clients risk management requirements. They also have the ‘luxury of large budgets’ and correspondingly large and talented in-house technical competence required to develop and deploy highly sophisticated functionality spanning the full trade life cycle from pre-trade, execution, through to rich post trade reporting tools targeted to specific client segments.

It’s also the case, that Continue reading

Global FX daily turnover reaches $4trillion up 20% according to BIS Triennial Survey


The Bank of International Settlements (BIS), has just released the latest 2010 Triennial Survey survey of global FX market volumes (the most authoritative survey of global FX market activity)

Headline items from the survey are: (full  report available here)

  • Global FX turnover was 20% higher in April 2010 than in April 2007, with average daily turnover of $4.0 trillion compared to $3.3 trillion
  • Surge in Spot Activity: The increase was driven by the 48% growth in turnover of spot transactions, which represent 37% of foreign exchange market turnover. Spot turnover rose to $1.5 trillion in April 2010 from $1.0 trillion in April 2007
  • Bank to client volumes exceeded Bank to Bank volumes For the first time: Activity of reporting dealers with other financial institutions surpassed inter-dealer transactions (ie transactions between reporting dealers). Other Financial Institutions, a category that includes non-reporting banks, hedge funds, pension funds, mutual funds, insurance companies and central banks, grew by 42%

Continue reading

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