EBS vs ParFX

An interesting story from LeapRate on changes EBS is planning, around the first in-first out (FIFO) protocol for filling incoming orders.

The changes are further efforts that EBS is making to redress the balance (and relationships) between their core liquidity providing banks and the high frequency community users of the platform.

The change — having incoming orders batched and then executed in a random manner, instead of the traditional “FIFO” first-in first-out method — is meant to remove advantages that high-speed, high-volume, high frequency traders have in trading markets such as FX.

LeapRate story here

In an interview on CNBC, EBS CEO Gil Mandelzis stated that:

“It is a technology arms race to the bottom, and a huge tax on the industry, since people are having to make significant investments in speed without any connection to their trading strategy. Speed has little to do with why many participants come to our markets. These are serious players who come to the market to exchange risk; they do not come to race.”

Clearly, the battle between EBS and ParFX is only just starting, as discussed here.

An interesting comment on the EBS changes comes from The StreetWise Professor (SWP) – always excellent, and great insight into market dynamics.

…Will it work?  Who knows?  But that’s the point.  Markets facilitate the process of discovery.  Market participants compete to find solutions to problems.

EBS has identified a problem, and are trying to fix it using a fairly innovative change to the matching process.  If they’re right that some kinds of HFT are detrimental to market performance (and thereby reduces the demand for to trade on the platform), and their replacement of continuous trading with high speed calls impedes this detrimental HFT without impeding the good kind, they’ll make money. And others will likely imitate, or take the basic idea and try to improve on it.

Full post from SWP here

As you can see from the chart below, whilst EBS volumes have recovered from the lows seen Dec 12, they suffered a 19% drop in March as compared with February (April data not yet available), this was covered in earlier posts here overall trading volumes.

FX Volumes Mar 13

 Average Daily FX volumes: XAll, Reuters Matching and EBS

4 Responses

  1. […] We have covered these two platforms here in EBS vs ParFX. […]

  2. […] the back of suggestions by clients, and follows the introduction of randomising earlier this year by ParFX, and followed by EBS. The randomising is designed to level the playing field and make the platform fairer and remove a […]

  3. […] The changes, first mooted in December follow a long period of consultation and are designed to make the platform fairer and remove the ‘technology advantages’ that some electronic market makers and high frequency trading firms (HFT) have benefited from, and will help to level the playing field. The changes follow similar moves last year by rival EBS. […]

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