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


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

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


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

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


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

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



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

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


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

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

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


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