The migration of foreign exchange trading from voice to electronic based trading has been gathering pace over the past few years.
Whilst exact e-FX ratios vary between banks, products, client segment and regions, recent research puts the e-FX ratio at anywhere between 50-70% of global totals (Greenwich Associates-70% and Aite Group -60%, and Bank of International Settlements at 50%)
Interestingly the adoption rate of e-FX is expected to accelerate as banks, in response to the ongoing investigations into irregularities around the FX fixing business (where traders are alleged to have colluded by sharing details of client order books) look to reduce the use of voice trading and migrate more flow over to the eFX channels.
There is much debate around how to ‘fix’ The Fix, including greater use of agency based algorithmic execution over a longer period of time, rather than the current limited ‘fixing window’, and some talk about moving to an exchange type model.
The FT has an article today talking about the migration to e-FX, and what was interesting for me was that for the first time, seeing actual bank FX volumes and their eFX ratios, which usually aren’t made available on a named basis, so below are some of the more interesting statistics.Here is the graphic from the FT article, and below some analysis of the data.
The chart below shows the e-FX ratios from the above graphic, in 2010 and 2013 for the top ten global FX banks. As we can see from the dotted lines, the average e-FX ratio amongst the top ten banks has increased from 25% (dotted black line) in 2010 to 46% (dotted red line) in 2013.
What is striking is that whilst Barclays was already doing 47% of all their FX electronically in 2010, RBS was only doing 8% of their FX electronically. Whereas in 2013, whilst Barclays has only managed to increase that ratio from 47% to 50%, RBS has increased it from only 8% to 43% of their FX being traded electronically.
The chart below shows the pct change in e-FX ratio for the top ten banks between 2010 and 2013. As can be seen with RBS, the pct of their FX that has migrated to e-FX has increased a whopping 511% in the past three years.
The actual FX volumes for the banks are as follows:
FT article here