FX Derivatives Trade Electronically

Terry Flanagan

Futures, and increasingly options, are being executed on automated platforms.

Foreign exchange derivative transactions are taking place increasingly on automated systems, as users seek to extract cost savings from their OTC businesses.

Demand for electronic trading venues is accelerating due to “the need to aggregate liquidity and apply transaction cost analysis to identify the best trading venues and demonstrate value to investors,” Paolo Gilardi, head of foreign exchange sales at TradingScreen, told Markets Media.

“Although FX futures are traded electronically quite extensively, few platforms integrate FX futures and FX cash on the same system, as we do,” said Gilardi.

Foreign exchange options are still traded manually for the most part. “More and more platforms are working to do this electronically and regulations are pushing for this type of trading, but it’s still relatively uncommon,” Gilardi said.

TradingScreen’s TradeFX platform span the spectrum of FX electronic trading models and venues, including full streaming, request for stream (RFS) and RFQ.

TradeFX is the foreign exchange trading module within TradingScreen’s TradeSmart execution management system (EMS).

The platform enables clients to efficiently trade FX without complex integration across platforms and to handle post-trade needs seamlessly through allocation, reconciliation and staging, from front to back-end systems, the company said.

In addition, TradeFX provides clients with the ability to view consolidated quotes, including spot, forwards, swaps and non-deliverable forwards (NDFs), across multiple banks and liquidity systems.

“What makes it unique is the depth of foreign exchange algos that we provide combined with the fact that it’s part of a fully integrated multi-asset platform,” said Gilardi. “The latter allows users to dynamically hedge foreign exchange exposure across asset classes. It also has integrated transaction cost analysis functionality.”

TradingScreen recently announced that it had added BNP Paribas and Merrill Lynch to its network of foreign exchange (FX) liquidity providers. This enables users of TradeFX to access FX liquidity through the trading desks of BNP Paribas and Merrill Lynch, covering spot, forward and swap deal types supported through full streaming and request for quote (RFQ) options.

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