Top tier FX Platforms Mar 16: Reported weak results, EBS volumes sharply lower -18.4%

In terms of Spot FX, all the major platforms delivered lower results in Mar  16.

  • EBS -18.4% to $83.7bn/day ($102.6bn/day in Feb 16), down -26.9% compared to Mar 15 level of $114.5bn/day
  • Reuters spot -6.3% to $104bn/day ($111bn/day in Feb 16), down -21.2% compared to Mar 15 of $132bn/day
  • The CME -4.2% to $114bn/day ($119bn/day in Feb 16), down -16.1% compared to Mar 15 level of $136bn/day

In terms of other products, Reuters showed a rise of Continue reading

Electronic trading in fixed income markets: report by BIS (Bank of intl settlements) – worth reading!

An interesting report (well worth reading), published in January by The BIS (Bank of international settlements), looks at the impact of ‘electronification’ of the fixed income markets. The report was based on structured interviews with market participants,  and a survey of electronic trading platforms.

It argues that advances in technology and regulatory changes have significantly affected the economics of intermediation in fixed income markets and that electronification is changing the behaviour of investors. The rise of electronic trading is creating efficiencies for many market participants, improving market quality in normal times, lowering transaction costs and reducing market segmentation, while at the same time Continue reading

Future of Single-Dealer Platforms: SIs, MTFs or OTFs?

An excellent article in covered also in FXWeek, looks at the future of Single-Dealer Platforms under MiFID II and discusses the options for bank platforms.

Should they register as:

  • Systematic Internalisers (SIs), which enables them to utlilise their own risk capital and trade on bilateral basis with customers
  • Organised Trading Facilities (OTFs), in which case they cannot use their own capital, and would in effect be running an agency business, but cannot run both an SI adn OTF under the same legal entity
  • Multilateral Trading Facility (MTF), which offers all to all trading

Initially, the SI regime seems obvious, as they can deploy their own capital, and trade with clients on a bilateral basis, which is what most SDPs currently do.

The test for an SI is that it Continue reading

BofE study finds mandatory swaps trading on SEFs increases liquidity and lowers costs!

Some interesting findings from a paper from the Bank of England, which looked at the impact of mandatory trading on swap execution facilities (SEF), for interest rate swaps (IRS) as required under Dodd Frank Act.

The paper looked at transactional data from the USD and EUR segments of the plain vanilla IRS market. The findings showed that as a result of SEF trading:

  • Activity increases
  • Liquidity improves across the swap market
  • Improvement being largest for USD mandated contracts which are most affected by the mandate
  • The reduction in execution costs is economically significant
  • Execution costs in USD mandated contracts, drop for market end-users alone, by $3 million–$4 million daily relative to EUR mandated contracts and in total by about $7 million–$13 million daily
  • Inter-dealer activity drops concurrently with the improvement in liquidity suggesting that execution costs may have fallen because dealer intermediation chains became shorter

Overall, the results suggest that:

“The improvements in transparency brought about by the Dodd-Frank trading mandate have substantially improved interest rate swap market liquidity.

Finally, the report finds that the Dodd-Frank mandate caused the activity of the EUR segment of the market to geographically fragment. However, this does not appear to have compromised liquidity.


Full report here

Interesting Celent report on future of Spot FX trading technology & platforms

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: Continue reading

BGC sells Trayport to ICE exchange for $650m

Back in Feb 2015, BGC the interdealer broker (IDB), bought rival GFI for $778m. The transaction included GFI’s FX Option platform Fenics as well as commodity and energy platform Trayport. Although Fenics was strategic to the transaction, BGC had talked about selling Trayport.

Today, BGC announced that ICE exchange, who last month bought IDC for $5.2bn, would pay $650m for the Trayport platform.

According to Howard Lutnick, CEO of BGC;

“One of the main reasons that BGC pursued GFI was the expectation that the sale of Trayport would dramatically lower the price and risk involved with respect to purchasing the rest of GFI’s businesses. The proposed sale price represents $650m of the $750m that BGC will pay for all of GFI.

This translates into BGC paying approximately $100m for $640m of GFI’s remaining revenues, or a multiple of just 0.16 times sales. Therefore, we expect the GFI transaction to produce enormous value for BGC’s investors.”

Trayport: generates less than 3% of BGC revenues ($18.9m in Q3/15)
FENICS, generates $60.7m in Q3/15, or $250m of annualized revenues and approximately $105m of annualized pre-tax distributable earnings

So, selling Trayport and keeping Fenics was a no-brainer for BGC!

David Weiss over at Aite group, has a nice blog post that saves me trouble of comparing the two heavyweight IDB groups of Tullett+ICAP’s Global Broking Business vs BGC+GFI.

Full details of the BGC/ICE transaction here

ICAP results, and strategy for Electronic Markets and Post Trade Services

ICAP today released first half results, confirmed the sale of the Global Broking Business (IGBB) to Tullett Prebon, and as part of their investor presentation, provided more details on the NewCo that will comprise Electronic Broking and PostTrade Services group.

In terms of result, group revenue fell 4% to £595m, although after stripping out ICBB, would show 4% rise, whilst revenues at TriOptima the post trade division rose 35%.

ICAP reported they had invested Continue reading