Interesting new research paper from Celent; FX Trading Platforms: Models Converge, and Competition Heats Up, examines trends in the FX markets, the blurring of traditional market structure boundaries, the evolution of Single-Dealer Platforms, and looks at the growing competition between platforms.
Some of the themes the paper are:
- Increasing competition among interdealer platforms.
- Increasing competition between single-dealer platforms and multi-dealer platforms.
- Regional banks upgrading single-dealer platforms to protect and grow market share.
- Expansion of product and client coverage by FX platform providers.
As a result of these themes, the traditional segmentation of interdealer, dealer-to-client, and retail market is blurring, with retail platforms going after the institutional market. At the same time, Institutional multi-dealer platforms operating in the dealer-to-client market are going after both ends of the market (interdealer and retail).
“Regulations will be an important driver of change for the FX platform market,” says David Easthope, senior vice president of Celent’s Securities & Investments practice and coauthor of the report. “Regulations are discouraging large banks in principal-based trading and will result in more of them focusing on an execution-based agency approach.”
“Significant reduction in platform development time and cost has meant the barrier to entry for new platforms has been lowered,” says Arin Ray, an analyst with Celent’s Securities & Investments practice and coauthor of the report. “However, in an already crowded market, entrants will have to position themselves to attract volume and market share.”