Just finished reviewing an interesting Celent report by Brad Bailey, on evolving spot FX market structure and technology trends in light of changes in global regulation, a blurring of traditional liquidity pools and the ongoing competitive landscape.
Brad touches on a number of the themes we have covered here over the year, but it’s always good to have someone else’s perspective on them.
The themes covered being:
- 2015 has been a year of turmoil in global FX
- Ongoing fragmentation in the venue space, whilst moving towards regional centers of FX liquidity
- With platform consolidation, witnessing the birth of mega-platforms that are buying trading technology and access to a variety of execution methods and analysis tools
- The prime brokerage model is damaged, if not broken, and requires new models
- Most major platforms have or will have disclosed liquidity solutions to allow clients and LPs to create a closed liquidity pool within the platform’s framework
- Regulation and reaction to the WMR fixing scandal is accelerating change
I was particularly interested in Brad’s views on how technology is blurring the distinction between SDP and MDP, as he mentions:
The concept of SDP and MDP is blurring and being replaced by better APIs, routing, and aggregation technology that access liquidity.
Firms that supply connectivity, aggregation, risk and access to quoting stand to have the greatest competitive advantage.
FX Trading Schematic from front office to processing (source Celent research report)
The key research questions covered in the report being:
- What makes up the FX trading ecosystem?
- What is the state of the electronic platform space in FX?
- What forces are shaping the future of FX trading?
Looking at the current FX platform landscape, Brad plots them against axis of market structure and dealer and client focus.
FX platform landscape (source Celent research report)
The report is certainly an interesting read, and can be accessed from Celent (subscription model only) here
Filed under: FX, MDP, OTC, Paul Blank, Regulation, Single-Dealer Platforms, Survey Results, Technology Trends |
SingleDealerPlatforms.Org 
Paul, my thanks to Celent for confirming the same findings re: the evolution of the FX market’s structure that GreySpark reached two years ago. Here’s GreySpark’s latest report, published in December 2015:
http://research.greyspark.com/2015/trends-in-fx-trading-2015/