In this VIEWPOINT, Alain Delelis, global head of spot and emerging market trading and head of European Foreign Exchange at Bank of America, takes a holistic view of the factors that influence market maturity and looks at the potential for online trading in emerging market currencies.

The importance of assessing maturity Maturity is defined as the overall readiness of a business to enter the next logical phase in its cycle. In foreign exchange, maturity is measured by assessing factors such as business and product cycles, democratization of markets, currency regulations and regime, risk management, market liquidity and technology. Within each of these factors are various stages or levels of readiness, where level 1 suggests a perfect market condition for online trading, and level 4 suggests prematurity. It is imperative to consider each of these factors carefully before making any business decisions. Moreover, it is critical to consider ALL factors holistically. The following is a discussion of the most important factors currently facing emerging market currencies.

Business and Product cycle
Every business and product has a cycle and goes through various stages of development. Financial institutions are continually focused on identifying new growth and revenue opportunities, represented in the graph below as Question Marks, which are necessary to take the place of Falling Stars, or those products that have run their course. Most resources are usually committed and invested usually during the Question Mark and Rising Star phases. On the product side, it is during the Expansion and Commodization phases (see following illustrations) where online business models and heavy usage of technology are recommended and necessary to handle workload efficiently.