The currency markets are increasingly going low-touch with electronic trading outpacing the volume done via telephones and high-touch.
That finding was the centerpiece of the 2015 Euromoney FX survey, which reported that 53.2 percent of foreign exchange trading volume is being executed via electronic means. This is the first time low-touch trading has ranked above high-touch in the survey’s 37 year history.
In 2014, electronic trading constituted 47 percent and in 2013 that figure was 44.8 percent.
The Euromoney FX Survey 2015 is a survey of liquidity consumption within the global FX markets conducted by Euromoney magazine. Euromoney contacted respondents from January 22 to April 3, 2015, with responses either collected via telephone or electronically at www.euromoney.com/fx2015. Euromoney received 3,794 valid responses from consumers of FX liquidity representing total FX consumption of $123.6 trillion in calendar year 2014.
Other key highlights:
– Citi retains top spot with 16.11% market share, beating arch-rival Deutsche Bank with 14.54%.
– Asia now represents over 30% of the market
– HSBC tops market share for corporate clients for the first time – ending Citi’s 36 year uninterrupted reign
– JPMorgan, BAML and Standard Chartered continue momentum, rising to fourth (2014 – sixth), sixth (seventh) and 12th (14th) respectively
– Banks fight ever harder for lucrative real money flows as market-share gaps narrow
For the full survey, please click here:
In response to this low-touch milestone, Marshall Bailey, president of ACI Financial Markets Association, an industry trade group, said that the findings from this year’s survey made for interesting reading. He noted that while the largest FX trading banks continue to play a dominant role, as expected, in the flow of currencies, how this flow is transacted continues to evolve is increasingly becoming an area of interest.
“Overall, electronic trading is good for trading, good for transparency and good for regulatory compliance,” Bailey said. “With the foreign exchange market under scrutiny from global regulators, the adoption of electronic trading has accelerated by institutions seeking to improve the way trading is conducted.”
However, on days of high volatility like the fx market experienced in mid-January with the SNB decision, Bailey added that voice and hybrid trading is still the preferred method of trading for some participants.
“The benefits of transparency as a result of electronic trading are numerous, and technological spend and investment has become a critical feature of modern markets, with trading and regulatory compliance increasingly achieved via electronic systems,” Bailey continued. “Such innovation is good for the market and will help the industry to evolve and learn from the past.”
Dan Marcus, chief executive at ParFX, said that the results show little change in relation to the market share of the industry’s largest players, but it does highlight the continued dominance of technology and electronic trading to facilitate cross border trades.
“The rise of electronic trading has been a natural evolution that has broadly improved the market’s structure, and the FX industry is a better place as a result,” Marcus said. “Today, there are fewer barriers to entry and lower trading costs, and this has resulted in a more liquid and diverse market. While voice trading has an important role to play, electronic trading of spot FX is a more efficient method of trading and the FX industry has maximized the benefits of this.”
He added that what is becoming apparent to him in light of recent events is the increase in demand for transparency across all stages of a trade process – a key attraction of electronic trading.
