As a new year begins, thoughts inevitably turn to what the next 12 months will bring in terms of new developments, old practices, areas of growth and markets under threat. In this article Nicholas Pratt interviews some of the industrys leading consultants to try and identify key focus areas that are likely to have a profound effect on the development of the electronic FX marketplace during 2011. Some of these address age-old issues that are common to every asset class, although with clearly different properties and stresses. Other developments are unique to the FX world and reflect the very distinct path that electronic foreign exchange is forging for itself.
The announcement earlier this year that the Association for Financial Markets in Europe (AFME) was to establish a division covering Foreign Exchange (FX) was a sign that change is on the table in the FX world, and that the major firms in the sector are conscious of the need to be active participants in that change
The CLS Aggregation Service, jointly built by CLS Group and Traiana, an ICAP company, went live in January, providing trade aggregation services to participants active in the over-the-counter FX market. Frances Maguire explores how the service is heralding a new chapter in operational risk reduction and banking industry collaboration.
Jon Vollemaere, co-Founder of FXecosystem shares some thoughts on low latency trading for FX and some pasta recipes.
CLS Group and interdealer broker, ICAP, are creating a new joint venture (JV) to provide trade aggregation services to participants active in the over the counter FX market. The new business, initially named CLS Aggregation, is designed to address the rapid increase in foreign exchange trading as an asset class by a widening group of hedge funds, algorithmic traders, retail and institutional market participants, which have brought substantially higher volumes to the foreign exchange industry.
At Preqin, through our daily conversations with investors, we constantly monitor institutional appetite and demand for hedge funds. We currently track over 2,200 institutions active in the asset class on our subscription database Hedge Fund Investor Profiles. Of these, 15.2% have stated a preference for foreign exchange specific hedge funds, with even more investors considering the area through macro and multi-strategy holdings. We predict that this area will grow further in 2009 as investors move their capital out of under-performing strategies into more liquid and flexible hedge fund strategies. Over the first quarter of this year we conducted a survey on behalf of e-FOREX to find out more about institutional demand for FX hedge fund products and the likely growth of this industry in 2009.
In the midst of the worlds credit crunch the centrally cleared counterparty for FX, FXMarketSpace, closed its doors due to lack of liquidity. Frances Maguire asks why it failed to gain traction and the likelihood of another CCP coming to the fore.
Has e-FX reached a level of maturity, or is this just an interim level of growth? While the recent turbulence in the global markets enabled stress testing of e-FX systems, it has also provided a better idea of what issues next generation e-FX systems need to address.
Simon Wilson-Taylor looks at the pressures being placed on the FX buy-side by the current turmoil in Global Markets and what role e-commerce can play in helping them meet the challenges.
Jim Leman and Ravi Manchi examine the factors making the detection of and access to liquidity complex in the FX trading environment
Nicholas Pratt sets out to discover who wants to trade anonymously in today's FX market, whether it is needed and what are the technology issues involved.
Sang Lee outlines why the FX market has witnessed a certain level of convergence across different customer segments.
The development of electronic trading and especially electronic platforms in the forex market has driven out the smallest banks from the market. Electronic trading has increased visibility on the market and reduced volatility, drying out the margins. Today, the FX market is a business of high volume and low margins, which leaves room only for very large institutions and specialists. Indeed, there are fewer banks involved in this market, which is now in the hands of the largest banks, which are becoming bigger and bigger.
Anthony Scholfield examines the factors that may move the FX market towards an exchange model providing an open architecture and aggregated one stop liquidity, algorithmic order processing and central clearing facilities.
Alain Broyon and Dr. Andre Duka discuss: Fight for Liquidity: Centralization versus Decentralization
Alain Broyon and Dr. Andre Duka discuss One-click trading and the global liquidity structure.
Frances Maguire reports on the continuing battle over market share between the banks and the FX portals which both claim they are winning.
Harrell Smith examines the growing importance of the ECN model in electronic FX trading.
Andy Kidd discusses how web technology is providing opportunities to deliver the services and functionality that the middle market segment needs.
Xavier Alexandre assesses how the benefits of Transaction Cost Analysis might be extended to FX market participants.
Donal Austin assesses the reasons that Price Engine providers have been better able to design, develop and deliver user friendly and market-aware FX electronic pricing solutions.
Jodi Burns outlines how the forex market is going through many of the exciting market trends seen in more developed asset classes such as equities and fixed income.
Each FX trading portal has distinctive features attracting a different client base. James Kemp looks at whether they are segmenting the FX market and what overall effect that might have.
The Foreign Legion gains new recruits
Geir Bjonnes and Dagfinn Rime discuss how the change in structure to the FX markets that electronic broking has brought about has influenced what dealers can do and know.
Justyn Trenner and Simon Watkins look at how the increasing use of e-commerce and electronic trading platforms is impacting on FX related costs.
Peter Banham discusses how the benefits of single, integrated cross-product web-distribution platforms go beyond mere improvements to trade processing functionality.
We summarise the findings of the report published this month by the Foreign Exchange Joint Standing Committee (FX JSC).
CLS is not a black box and many banks looking for a CLS provider are ignoring the strategic implications of their decision say Chris Marshall and Seth Cohen. They examine the upstream (pre-trade) and downstream (post-trade) implications of CLS to sho
While liquidity has decreased over the past few years, the uptake of eFX is not the main culprit says Mark Galant, who traces the impact of electronic trading in shifting liquidity amongst different FX players.
Hugh Stewart uses a neat metaphor to compare the FX market place and its major participants to highly adaptable sharks, who have long remained unmodified and withstood competition.