Report on Trading Platforms for OTC Derivatives from IOSCO (worth a read)

International Organization of Securities Commissions (IOSCO), has just released a follow-up analysis on their Report on Trading of OTC Derivatives.

The analysis looks at the types of trading platforms available for the execution of OTC derivatives transactions in IOSCO member jurisdictions.

In particular:

Chapter 3, provides an ‘Overview of Current Multi- And Single-Dealer Trading Models’

Annex II – Summary of Platform Types and Features

It’s a good paper, not too long, and worth reading.

Commentators start to pick up on my analysis of slump in multi-dealer FX volumes

Good to see the eagle eyed boys at Profit & Loss have now picked up on the analysis I did on Monday, showing that multi-dealer platform FX volumes took a significant 26% drop between Apr-Oct 2011, according to data released in the latest Bank of England semi-annual FX volume surveys here.

As Colin Lambert mentions in his excellent ‘And Another Thing‘ column today:

…. I think there has been a push back towards the bank platforms, especially as their algo execution (including aggregation), quasi-ECN and order management technology has continued to improve. I think the bottom line is that with a commoditised price and increased transparency, the argument for the MBPs is diluted a little and the judgement of where to trade comes back to which venue has the greater flexibility, range of tools and lowest cost. Price is pretty much a given and if a bank lets the customer down they will soon know about it in reduced business levels.

As readers to this blog will know, we have long-held the view that single-dealer platforms, are ideally positioned to be responsive and highly innovative, and able to deliver great liquidity to client’s at lower cost than the MDPs.

Latest BofE FX survey data shows 17% rise on year, but 26% fall in Mutli-Dealer Platform vols

The Bank of England has JUST released their latest semi-annual FX turnover survey results for October 2011.


  • Daily FX vols $1,972bln, down 3% on April 2011, some 17% higher on the year
  • Spot vols rose 2% to a record survey high of $802bln/day (42% of total vol)

Multi-Dealer Platforms see huge 26% drop in vols compared to April 2011 Continue reading

Single bank platforms huge winners according to Euromoney FXNews buyside survey

An earlier post this week looked at the initial findings from the EuroMoney FXNews inaugural FX buyside survey.

The survey finds that voice trading is likely to fall below 15% as more bank platforms come online, and more bespoke currencies move from voice to online trading.

The survey then reveals that:

Continue reading

FXall IPO details indicate valuation in region of $400mln

Thanks to LeapRate, we now have a pretty good idea of the FXall IPO details (here)

As previously mentioned, FXall plans to raise $75mln, with “all proceeds going to existing shareholders” – with some of the banks expected to exit on flotation!

LeapRate provide analysis below showing that FXall is likely to come to market at a premium to other public FX platforms.

FXall IPO_valuation

FXall Q3 results (some thoughts)

FXall Q3 results out, and covered here by LeapRate, including an updated IPO registration. LeapRate highlight the continuing decline in margins, as shown here.

FXall Operating Margins – under pressure (charts from LeapRate)

FXall Corp_margins                       FXall ECN_margins

FXall SEF: Separately, the NFA will provide regulatory services for FXall’s SEF offering, in preparation for when rules have been formally completed.

My view: Although, as previously mentioned,  we see single dealer platforms continuing as preferred channel through which buy-side firms access liquidity, whether provided by banks directly, or routed to SEFs where mandated. To date, 99% of FXall volume consists FX spot, fwds and swaps, all of which are exempt from SEF mandates.

Bank ownership: Under SEF rules, bank ownership is limited to under 25%, so will be interesting to see whether the current FXall bank shareholders each of which hold 5.1% (BNP, Citi, Credit Agricole, CS, Goldman, HSBC, MS, RBS – although the top three FX banks, Deutsche, UBS and BarCap are not shareholders in FXall) will cash in, or stay onboard to have a stronger influence on possible intermediation of their bank-client relationships, as mentioned here in could FXall become too big.

FX profitability across Client Segments

I have been reading some excellent research by ClientKnowledge, which compared bank FX profitability across client segments and geographic regions between 2009 and 2010.

So much great information contained in this chart.

Continue reading

Deutsche Adds FX Swaps Orders to Autobahn – thoughts and background

Interesting development from the ‘Mighty’ Deutsche Bank, who have added FX swaps order functionality to their Autobahn FX platform (FX week carry story – password protected).

According to Adam Vos, global head of FX forwards at Deutsche Bank in London:

The product is targeted predominantly at more sophisticated FX swap desks at other top-tier banks and mid-tier banks, but could be used by other institutions as well.

This is a good move by Deutsche, as FX Swaps are increasingly being used by banks and other ‘sophisticated’ market participants to manage liquidity and for funding requirements (as detailed in this IMF working paper)

And of course, the other great thing is Continue reading

CDS research from FRBNY

Last week the Federal Reserve Bank of New York published some detailed research on traded volumes of CDS in May-Sep 2010. Some analysis I saw in the WSJ reinforced our earlier views that the traded volume is *extremely* thin & therefore the rationale of a forced multi-dealer trading facility, i.e., SEF, is tenuous at best.

Further analysis by the FT Alphaville team is here. Have a look – you may be surprised!

eFX volumes Single Dealer Platforms vs Multi Dealer Platforms

Research by Greenwich Associates (released in March 2010) states that around the world, multi-bank electronic trading platforms captured about 40% of overall FX trading volume in 2008-2009 and single-bank platforms captured another 15%.

However, the two most authoritative sources of actual empirical data on FX activity, namely the Bank of England (BoE) and the Bank of International Settlements (BIS) seem to paint a very different picture!

Bank of England (BofE): Empirical data released by the Bank of England (Oct 2009), covering FX activity between reporting dealers and clients in London (the largest global FX market), shows that single dealer platforms (SDPs) accounted for 25% of all electronic FX volume, compared with only 13% of electronic volume done through multi-dealer platforms (MDPs).

(BoE):London daily eFX volumes by SDP and MDP (2009)

Bank of International Settlements (BIS): The most definitive empirical data on global FX volumes is produced every three years by the BIS in their Triennial survey. Data from the 2007 triennial survey shows a similar picture to the BoE data. Whilst eFX accounted for 34% of all global daily FX volumes, SDPs accounted for nearly 30% of all electronic FX volume, compared with only 21% done through MDPs, as shown below:

(BIS): Global daily eFX volumes by SDP and MDP (2007)

The 2010 Triennial Central Bank Survey of FX activity will be released in August, and should prove fascinating reading in terms of the latest trends.