Single Dealer Platforms growing fastest, and provide deepest liquidity


Financial News is running a story today (which we covered on 1st February here) regarding a recent EuroMoneyFX News survey, which shows that single dealer platforms were growing at up to seven times the rate of multi-dealer platforms.

respondents to the survey cited their;

relationship with a bank as the most important factor in choosing to trade with it. The importance of the bond between dealer and client appears to trump price competition.

As we have mentioned many times, clients typically receive more consistent liquidity on the bank’s own platform, as compared to MDPs, as stated here:

liquidity on multi-dealer platforms is often not as deep as it appears, leading to so-called price slippage on execution – the price seen on-screen is not always what traders get when they execute.

Mark Hewlett, managing partner at investment firm Anello Asset Management, said: “The bigger banks hoard the deep liquidity that they don’t provide to the multi-dealer platforms and keep it on their own platforms. The bigger single-dealer platforms can even provide more liquidity than some multi-dealer platforms.”

The full article is available here (password required)

2 Responses

  1. my interest is fixed income .

    • Hi Vincent.

      I am aware of your firm’s position in Fixed Income as well as FX (and just noticed your recent FI pending patent!).

      We continue to see the big bank’s focusing resources to ensure their FI SDPs can support both direct client pricing, as well as (smart order) routing capabilities to SEF/OTF/exchange.

      In the case of say BarCap’s, BARX FI, I hear they have developed ‘FI Portfolio Optimisation’ service, that enables clients to run scenarios over porftolios, and see the optimal execution path for the portfolio, based on fully loaded costs, capital optimisation criteria etc – comparing risk pricing vs agency pricing.

      In other words, banks are adding huge value to their SDPs to enable them to retain their role as key relationship channel for clients, providing intelligence, execution, routing and risk management capabilities across trade life cycles and products.

      Best Regards

      Paul

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