Celent study on Electrification of FX Markets

Celent study (summary available) on the ‘electrification’ of FX markets.

Summary of findings:

Algo trading, non-dealer and retail have driven ave ticket size down from $4.3mln in 2004 to $1.8mln in 2010, and number of daily trades up from 86k to 498k.

Single Dealer Platforms continue to gain in popularity due to greater speed and reliability of trade execution.

Greater focus on unified STP and smaller players opting for hosted services.

The report says…

“The success of FX is tied to higher IT spending. Competition for market share has resulted in larger banks scaling up their investments. Smaller banks have been pressed to come up with innovative approaches, and we see them moving towards providing niche offerings such as specializing in specific derivatives or currency pairs, or focus on specific segments of customers like hedge funds and asset managers.”

Another reason why smaller banks are increasingly looking at newer ‘productised’ eFX technology which enables them to ‘fast track’ the build, rollout and differentiation of their own eFX offerings.

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