EuroMoney 2011 FX Poll – some thoughts

SDP volumes continue to outstrip MDP volumes:

An interesting comment caught my eye in the EuroMoney 2011 FX poll that customers preferences are changing, and that whilst single dealer platform (SDP) volumes still exceeds multi dealer platform (MDP) volume, the gap is closing, and clients are starting to migrate to MDPs.

Still seems a decent gap to me! Continue reading

EuroMoney 2011 FX Poll results out!

EuroMoney 2011 FX polls results released.

Site very busy at moment, and may not respond.

Analysis to follow later, but here are the key headlines: Continue reading

Caplin SDPs move into the world of REM

Caplin’s excellent technical blog, ‘Platformability‘ has a great post today talking about devlopment work we have done for an SDP which uses eye gestures to control the GUI.

With this new technology, Caplin will move into the eye trading equivalent of High Frequency Trading (HFT), which will of course be Rapid Eye Movement trading (REMt) for short!

Take a look here

FX, better safe than SEF!

If confirmed, this will be a big win for FX Markets, and good news for FX Single Dealer Platforms, and will enable banks to continue to service clients with highly differentiated and innovative offerings.

It’s looking like FX markets have been successful in lobbying the US Treasury to exempt FX Swaps and Forwards from Dodd Frank legislation, according to a story carried in today’s FT (here).

FX Derivatives (Swaps, Options and perhaps long dated Fwds) fall under Dodd Frank Act (DFA), unless specifically exempted by the US Treasury (here)


Exempt FX: Global FX trade bodies have argued that FX derivatives are very different from other OTC derivatives, and that counterparty risk which DFA seeks to eliminate is not a major issue in FX, and the more important settlement risk, is already fully managed by the CLS Bank settlement system. I have covered this in an earlier blog here.

Include FX: The CTFC (tasked with implementing DFA), has been seeking to have FX included under DFA. Also, a Washington based think tank was lobbying for FX to be included (here)

Latest BIS FX data on Single Dealer Platforms

Single Dealer Platforms (SDPs) accounted for 28% of all eFX trading, according to detailed data just released from the Bank of International Settlements (BIS) 2010 Triennial survey (page 16) covering the Global FX Markets (compared to 30% in 2007), with Multi Dealer Platforms share being slightly lower at 27%.

An engaging User Experience (UX) is more than skin deep

photo by ratterrell on Flickr

Here’s an interesting article on TABBForum:
Show me some skin

It’s great to see the attention product and information design is getting at the moment. At Caplin we blend these skills with interaction design and many others into our UX design practice for Single-Dealer Platforms.

Whilst the GUI is often seen AS the product, you have to consider the unseen design research and development that goes into producing a truly engaging user experience.

Really great GUI is not cosmetic gewgaw. Really great GUI facilitates interaction flow and engages users in an experience that’s more than skin deep.

Are SDPs becoming SEF compliant?

It was only a matter of time, before one of the highly innovative top tier e-trading banks adapted their Single Dealer Platform so as to make it more ‘SEF friendly’, for Interest Rate Swaps.

Whilst the press release focuses on new functionality, for Fixed Income IRS trading, the wording looks very much like Deutsche Bank, with the announcement of the launch of Autobahn’s new ‘Prism guaranteed Liquidity Service’ is positioning this offering if not to be SEF compliant, at least to be highly SEF friendly (whilst not actually becoming a SEF) – and no doubt they will be the first of many to come!

To be clear, I am not suggesting that Autobahn will be registered as a SEF. Rather, I am suggesting that by enhancing their Single Dealer Platform, and delivering:

  • Enhanced levels of pre-trade transparency
  • Algorithmic interaction with an aggregated depth of liquidity
  • Links to Clearing Houses
  • Links to Post Trade Reporting Systems

Might be enough to enable an enhanced SDPs to meet the spirit of what an SEF is meant to be, without being one, and yet still satisfy the CFTC – we shall see!

Who will be next?

Research: the new driver for online trading

Here’s an interesting new trend.

The business groups in banks that drive online trading initiatives in general, and SDPs in particular, are usually the trading desks – particularly, of course, in OTC markets like rates and FX.

So it’s notable that we are currently talking to the research divisions of three tier-one banks about integrating with trading. All large banks already have extensive institutional portals offering research, trade ideas and technical analysis to their customers. What’s happening now is that the research divisions that own these are looking for ROI — they want to see a direct route from their ideas to an executed trade.

There are two reasons for this: (1) it obviously makes sense to try and capture a client’s business there and then, by providing a smooth and easy route from research into execution; and (2) the research divisions want to justify their cost by associating themselves directly with revenue.

I’ve long been preaching the message that banks need to focus on vertical integration (pre-trade, execution, post-trade) in SDPs as well as horizontal integration (cross-asset). But it’s interesting to see this being driven so strongly now from the pre-trade end rather than from the trading end.

Single Dealer Pages are NOT Single Dealer Platforms

It’s always a good sign, when your competition attempts to copy you.

Bond Vision, the bank to client arm of the MTS bond trading platform, today announced the launch of a suite of Single Dealer Pages for fixed income from six leading dealers – (similar to the single bank page concept that is already available on Bloomberg).

In both FX and FI, banks and clients seek a more customized “Relationship Channel”, and whilst MDPs seek to satisfy this demand, the nature of their model, means they can only really offer a ‘one size fits all’ single bank channel.

So, from what we see, whilst MDPs continue to deliver an important source of client execution flow, banks are nevertheless continuing to invest in their own Single Dealer Platforms, building highly differentiated, and targeted segment solution “Relationship Channels” for clients, through which clients can access the deepest liquidity, the finest prices, and the most compelling and actionable research.

Spending on Single Dealer Platforms

I recently attended an FX conference hoping to hear a spirited panel debate on the future of ‘Single Dealer Platforms (SDPs)’. I was therefore somewhat surprised to hear the chair suggest that the future was actually through multi dealer platforms (MDPs) – his plan worked, as the debate was pretty poor until that point, and certainly livened up after that!

Being in the audience and not on the panel, I bit my tongue as long as I could, in order to allow the panelists their ‘sponsored air time’ (one bank, one MDP, and two others).

But in the end, I had to raise my hand and proceed to explain why (in my opinion) that was not the case, and that volumes traded through single dealer platforms were running at twice the levels traded via the multi dealer platforms (see my previous blog on eFX volumes Single dealer vs multi dealer).

Continue reading