FX Dealing Capacity Expands

Terry Flanagan

The global FX market is experiencing an expansion in electronic trading platforms and routing capabilities, whereby the buy side can connect to a plethora of trading platforms.

There has been a flurry of new platforms, both single dealer and multidealer, entering the market offering electronic trading in FX instruments, according to a report by research firm Celent.

Eight new platforms have launched in the last six months, including traFXpure and TpSpot Deal, joining such category leaders as FXall, FX Connect, Current, and FX Trading on Bloomberg.

The market has experienced an increase in the e-commerce side of options trading with the launch of FX options-only platforms, resulting in the entry of multidealer platforms catering to the FX options volumes, according to Celent.

Bloomberg this month launched a new feature that enables clients to trade FX options through Bloomberg’s multibank trading platform, FXGO.

Through the request-for-quote (RFQ) system, market participants can simultaneously request and consolidate pricing from multiple providers for any currency option.

“Over 45,000 FX professionals use Bloomberg as their desktop solution,” said Tod Van Name, Bloomberg’s global business manager for FX, economics and commodities, at Bloomberg ‘s recent FX12 Summit.

The FX option technology is integrated with Bloomberg FXGO. Average daily volume on FXGO, which includes spot, outright, non-deliverable forwards (NDFs), swaps and deposit trades, has increased 79% year-to-date.

Many Bloomberg users who use FX functionality are not FX professionals.

“Half of the 315,000 people who use the Bloomberg desktop follow currencies regularly,” said Van Name. “Our footprint is growing, especially in emerging markets.”

Regulations are driving higher investments in technology. The key regulatory implications for FX platforms are changes in FX workflow, clearing and reporting requirements, the impact of SEF/OTF rules, and standardization of contracts, according to Celent.

The new Bloomberg platform “will be SEF-compliant as we move to a more regulated environment,” Van Name said.

Bloomberg subscribers’ quote requests can be priced via automated bank pricing engines or manually quoted by more than 230 liquidity providers, enabling market participants to trade with major and local market makers.

Credit Suisse plans to provide competitive automated FX options quotes through Bloomberg’s new service.

“It is clearly going to be important for end-users of these markets to have access to multiple-bank trading systems as new regulations designed to achieve best execution are introduced,” said Joerg Schmuecker, global head of FX options e-commerce at Credit Suisse, in a statement.

Separately, DealHub, operated by Option Computers Ltd., has launched announced FX Distribution Hub, a new service which allows customers to price into any FX market destination via a single interface.

A number of banks are already using the service to price into trading venues, taking advantage of connectivity which includes Reuters Matching, EBS, FXall, 360T, Currenex, Bloomberg, CFETS and FX Connect.

The FX Distribution Hub distributes ready-formed prices to multiple venues, returning fills and credit messages as required.

“With 10 new FX venues in the last year and a raft of changes to existing ECNs, the cost and complexity of getting your pricing into the market has never been greater,” said Peter Kriskinans, CEO of DealHub, in a statement.

Once integrated with a bank’s core pricing platform, often as simple as connecting to an existing API, FX Distribution Hub can route pricing to any ECN, multi-bank portal, single dealer platform, aggregator or customer FIX trading API.

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