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Electronic FX Trading Hits Plateau, Future Growth Uncertain
Traders Magazine Online News, August 24, 2017
So, what is the best way to trade the foreign exchange markets?
In a market that trades 24/6/365, electronic trading makes the most sense. And according to market consultancy Greenwich Consultancy, the forex markets remain the most electronically traded market in the world. Of the total notional volume traded by institutional investors globally, 75% is now traded on the screen, up from just over 43% before the credit crisis. Seventy-two percent of investors trade at least some of their volume electronically.
The impressive adoption of e-trading in FX over the past decade stands out not only versus other asset classes, but also because it has developed via natural market demand and not regulatory mandate.
Greenwich analyst and report author Kevin McPartland noted that in the past five years, electronic trading in interest-rate swaps and credit-default swaps has grown rapidly to roughly two-thirds and 90%, respectively. But that growth was almost completely due to regulatory requirements mandating, in effect, “Trade electronically, or else.”
But is the there room for more growth?
Despite the FX market’s steady embrace of electronic trading, Greenwich said it might have hit a plateau. E-trading levels have remained roughly flat since 2013, signaling the market has hit the upper limits of on-screen trading and the next stage in its evolution.
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