Deutsche Adds FX Swaps Orders to Autobahn – thoughts and background

Interesting development from the ‘Mighty’ Deutsche Bank, who have added FX swaps order functionality to their Autobahn FX platform (FX week carry story – password protected).

According to Adam Vos, global head of FX forwards at Deutsche Bank in London:

The product is targeted predominantly at more sophisticated FX swap desks at other top-tier banks and mid-tier banks, but could be used by other institutions as well.

This is a good move by Deutsche, as FX Swaps are increasingly being used by banks and other ‘sophisticated’ market participants to manage liquidity and for funding requirements (as detailed in this IMF working paper)

And of course, the other great thing is that FX Swaps are (still) exempted from the SEF regulations, and therefore will continue to be tradeable via SDPs, which deliver a far higher level of profitability than the same volumes flowing through MDPs.

By way of background, according to the Bank of England FX survey data, FX swaps as a pct of overall FX volumes have been steadily falling from a high of 51% of total volume back in 2008 to a low of 42% of volume in April 2011.

Bank of England FX Survey Data showing Pct of Daily FX Vol/product type

By contrast, over that same period, the pct of FX Swaps that have been traded through either single or multi dealer platforms has steadily risen from around 11% in 2008 to 19% in April 2011 (see chart below).

FX Swaps vols traded on single and multi dealer platforms (BofE FX survey data)

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