There are two primary factors driving development and investment in FX Order Management (FXOM): business process and added value. With regard to business process, banks are vying to provide more functionality as a means of attracting more customer business. Automating the process also reduces the sales and administrative costs of managing that business. In terms of added value, most banks believe that the information contained in the order book can be used to better understand individual client behavior as well as general industry trends. Evidence of this growing interest can be seen in the proliferation of research in the area of Microstructure pricing.

Participants in the FX markets, especially the larger banks and brokerage houses, are now looking to extract value out of order flow. Many of these organizations have grown through mergers and acquisitions, and have therefore inherited disparate business practices and systems resulting in fragmentation of liquidity. Time differences between their international dealing centers only add to this fragmentation and loss of centralized control. Therefore such institutions are now looking for ways to view their order flow across their organization. Lastly, buy-side institutions are becoming more demanding, and there is pressure to reduce the overall cost of trading, clearing and settlement.

In order to support and grow the overall number of clients served, an institution requires an always-available workflow processing engine that automates all aspects of the electronic dealing process. FX transaction costs are at least partially determined by the difference in the bid/ask spread, corresponding to the loss incurred by simultaneous Buy and Sell transactions.

The most cost-effective way of executing trades for a market-making institution, is to cross them internally while still achieving best execution. [See figure 1 below.] Apart from saving on transaction fees, internal crossing minimizes the impact and opportunity costs of trades, while maintaining available credit. Liquidity can also be enhanced by directing organization-wide order flow into the internal marketplace, provisioning features like market-making, auto-quoting from inventory and providing a single order book that follows the markets across the globe.