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

Posted on February 18, 2016 by Paul Blank

An excellent article in Risk.net 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 →

Filed under: FX, MiFID II, OTC, OTF, Regulation, Single-Dealer Platforms | 1 Comment »

CLS FX Settlement Jan 16: value of transactions up 8.3% to $4.84trillion/day in Jan 16 (highest level since Jun 15)

Posted on February 15, 2016 by Paul Blank

The CLS FX settlement system has reported a healthy +8.3% increase in the ADV of FX trades settled through their platform in Jan 16, taking volumes back up to $4.84trillion/day (up from $4.47trillion/day in Dec 15). This is the highest level since Jun 15, although still down -8.9% on Jan 15.

In terms of number of transactions settled, these showed a strong gain, up +30% to 1,249,226 in Jan 16, although still down –12%  on Jan 15 level of 1,419,369.

Details from the platform and charts are as follows: Continue reading →

Filed under: FX, Paul Blank, Survey Results | Leave a comment »

FX 2nd tier platform vols Jan 16: Fastmatch (+24.3%) & Hotspot (+7.1%)

Posted on February 10, 2016 by Paul Blank

Second tier FX volumes showed gains in January, led by Fastmatch which reported a+24.3% rise to $11.8bn/day, whilst Hotspot reported a +7.1% gain.

2nd tier platform vols Jan 16

Table showing Second Tier platforms: Hotspot, Fastmatch vols for Jan 16

The charts below show the volumes comparisons between Hotspot and Fastmatch. Continue reading →

Filed under: FX, Paul Blank | 1 Comment »

FX Platforms Jan 16: Top tier FX platforms report strong gains, led by EBS +37%

Posted on February 8, 2016 by Paul Blank

The top-tier FX platforms have now released their Jan 2016 volumes.

In terms of Spot FX, all the major platforms delivered strong performances:

  • EBS +37.7% to $103bn/day ($74.8bn/day in Dec 15), still down –1.7% compared to Jan 15 level at $104.8bn/day
  • Reuters spot+35.2% to $123bn/day ($91bn/day in Dec 15), +16% compared to Jan 15 at $106bn/day
  • The CME +9.4% to $121bn/day ($111bn/day in Dec 15), up +1.1% compared to Jan 15 level of $120bn/day

In terms of other products, Continue reading →

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BofE FX Survey data: London FX volumes down -21% in Oct 15 (SDP volume+6%, MDP volume -13%)

Posted on January 26, 2016 by Paul Blank

The Bank of England today released their latest semi-annual FX turnover survey results for Oct 2015.

Highlights on London FX volumes for Oct 2015

  • Total FX volume  of $2,148bn/day, down -13.4% compared to Apr 15, and down -21% compared to a year earlier, and the lowest volumes since Oct 12.
  • All product volume  fell:
    • Spot -24% at $737bn/day (and down -34% on year earlier, to lowest since Oct 12)
    • FX Options – 24%
    • NDFs -16% and FWD -13% although FX Swaps were only -2%
  • Turnover fell in most currency pairs:
    • EUR/USD down -17% to $640bn/day
    • Only three in top 22 currency pairs rose:
      • USD/AUD +8%
      • USD/CNY + 3%
      • USD/KRW +11%.

Continue reading →

Filed under: FX, Paul Blank, Survey Results | 2 Comments »

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

Posted on January 17, 2016 by Paul Blank

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

Filed under: Dodd Frank, OTC, Paul Blank, Regulation, SEF | Leave a comment »

Reuters announce FX Options vols increased 166% in 2015 (seems far higher than official BofE survey data suggests)

Posted on January 11, 2016 by Paul Blank

A Reuters press release on FX Options caught my eye today. The announcement states that:

Thomson Reuters FX dealer-to-client venue saw a surge in options trading volumes of 166 percent in 2015 compared with the previous year. In particular the fourth quarter of 2015 saw record-high monthly, weekly and daily volumes with over 36 global and local active options price-makers and more than 225 active options price-takers now on Thomson Reuters FX platform.

Thomson Reuters FX Trading provides both relationship trading (bank-to-client) and bi-lateral trading (interbank) for vanilla and exotic FX options. In recent months the company has introduced electronic FX options callouts to streamline how banks can access options liquidity in the interbank market. By providing one single point of access to options liquidity via electronic callouts or via Thomson Reuters FXall dealer-to-client request-for-quote service, FX Trading helps market participants to efficiently manage their trading risk.

According to Phil Weisberg, Global Head of FX at Reuters: Continue reading →

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CLS FX Settlement: Value of transactions up 1.4% in Dec 15, end year at lowest levels since Aug 13

Posted on January 11, 2016 by Paul Blank

The CLS FX settlement system has reported a slight increase of +1.4% in the ADV of FX trades settled through their platform in Dec 15, taking volumes back up to $4.47trillion/day (up from $4.41trillion/day in Nov 15). This is the lowest on the platform since Aug 2013.

In terms of number of transactions settled, these were almost unchanged at 961,698 in Dec 15, although they are now at their lowest level since Jul 14.

Details from the platform and charts are as follows:

CLS value of instructions submitted: $4.47 trillion/day in Dec 15, up +1.4% on the $4.41 trillion/day in Nov 15, although down -8.2% compared to Dec 14.

CLS number of instructions submitted: 961,698/day in Dec 15, down -0.3% on the 964,810 in Nov 15, and down -21.4% on Dec 14 level of 1,223,109.

Average Trade size: $4.65mln in Dec 15, up +1.7% on the $4.57mln in Nov 15 and up +16.7% compared to the $3.98mln in Dec 14.

CLS Clearing charts Dec 15

CLS Data: Value and number of transactions submitted to CLS in Dec 2015

Note: CLS reports both sides of an FX transaction. To adjust the average daily value data to equate to the same reporting convention used by the Bank for International Settlements and the semi-annual foreign exchange committee market reports, the gross values should be divided by two.

 

Filed under: FX, Paul Blank, Survey Results | Leave a comment »

FX Platforms Dec 15: Reuters and EBS almost unchanged in Dec 15, whilst The CME showed strong 24% gain.

Posted on January 10, 2016 by Paul Blank

The top-tier FX platforms have now released their Dec 15 FX vols.

In terms of Spot FX vols, Reuters and EBS are barely changed, with Reuters +1.1% at $91bn/day, whilst EBS -0.9% at $74.8bn/day. However, in terms of other products, Reuters showed an +8.8% rise in other product vols, including NDFs and swaps (on their SEF) to $246bn/day.

However, The CME Group, had a great end of year, with a strong +24.1% gain in all FX product vols in Dec to stand at $110.6bn/day ($89bn/day in Nov 15). Although given that it’s Dec, we can’t really read too much into year-end figures.

1st tier platform vols Dec 15Table showing Top Tier platforms: Reuters, EBS and CME Futures vols for Dec 2015

If we look closer at Continue reading →

Filed under: FX, Paul Blank, Survey Results | Leave a comment »

The continual rise of non-bank market-makers.

Posted on January 5, 2016 by Paul Blank

I have covered the rise of ‘non-bank’ or ‘alternative’ market-makers a few times recently, notably here, here and here.

Looking at how, armed with market leading technology, talented etrading techies from sell-side firms and teams of razor-sharp quants, these firms are now providing deep consistent liquidity to the market in a capacity previously the preserve of the top-tier ‘flow’ monster’ banks.

The perception of non-bank market makers has traditionally been Continue reading →

Filed under: alternative market maker, FX, Paul Blank, Regulation, Technology Trends | Leave a comment »

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