e-FX Industry Report : Look Back
Justyn TrennerCEO & Principal, ClientKnowledge.
Justyn Trenner provides our regular overview of the key milestones
in the growth and development of eFX over the past year.
Last year, in these pages, ClientKnowledge noted that the market
had shifted, over the last ten years, from a broadly, simple
single-dimensional market (from interdealer brokers to sell-side to
buy-side) to a more complex multi-dimensional space, where those
definitions were much harder to apply. 2005 has seen two par-allel
evolutions along similar lines, both materially fuelled by
technology. The first is the changing roles and types of trading,
rendering the old neat segmentation into providers and clients
The second is the growth of aggressive, or alpha-seeking, activity
(and outsourcing of liquidity) which tend to oblige market
participants to be more disciplined about why and how they trade
and, not insignificantly, how they process their trades.
The background to all of this is a growing and healthy
market-place. Three lots of data recently issued paint a congruent
picture: sell-side surveys by the Federal Re-serve Bank FX
Committee and the Bank of England Foreign Exchange Joint Stand-ing
Committee, covering dealers activities in their respective centres
and Cli-entKnowledges annual study into buy-side activity, speaking
to more than 2,000 corporations, real and leveraged money-managers,
client banks and other interme-diaries. Together, these paint a
revealing picture of the significance of these different
participants and how the markets structure is evolving.
The Bank for International Settlements most recent triennial
surveys of the foreign exchange market have revealed a sharp drop
in overall volumes between 1998 (US$1.5trn) and 2001 (US$1.2trn),
followed by an even more marked rise as at 2004 (US$1.9trn).
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