Trends in FX Trading 2015

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The Decline and Rebirth of the Inter-dealer Spot Market

GreySpark Partners presents a report, Trends in FX Trading 2015, exploring how all-to-all (A2A) trading became a reality in the spot FX market. This change in the structure of the spot FX market over the course of 2014 and 2015 is significant because it highlights a trend in which both dealer-to-dealer and dealer-to-client platforms are altering their trading models so that they can offer buyside firms and banks access to many different types of currency liquidity pools.

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The report explores the implications of these changes to the spot FX market structure for the business models utilised by banks and by buyside firms. For the leading FX banks, the increasingly A2A nature of the market’s structure has resulted in the development of a new type of hybrid trading model that combines principal dealing and agency trading business models. However, for financial buyside firms and non-financial corporates, spot FX liquidity in an A2A marketplace remains fragmented, and there is an imperative for those companies to now develop the same currencies aggregation tools pioneered by banks several years ago.

As a result of the business model implications for buyside firms and banks linked to the development of an A2A spot FX market, client-to-client spot FX trading on equities-like exchange platforms remains an elusive long-term structural goal. However, in the future, equities-like spot FX trading could emerge through the continued development of peer-to-peer currency exchange platforms, which are growing in sophistication in 2015 and could eventually reach a point wherein they will become commonplace as FX trading venues.

Published on: 2 Dec, 2015

Trends in FX Trading 2015 – Table of Contents

  • 1.0. The Current Structure of the Spot FX Market
    • 1.1. Algorithmic Execution Dominates Spot FX Trading
    • 1.2. Banks Now Predominantly Trade Spot FX Directly with their Clients
    • 1.3. All-to-All Spot FX Trading is a Reality on Inter-bank Platforms
  • 2.0 Implications for the Sellside Spot FX Trading Business
    • 2.1. Internalisation of Client FX Flows and Monetisation of the Resulting Skew
    • 2.2. Creating an Agency Trading-Riskless Principal Spot FX Model
  • 3.0 Implications for the Buyside Spot FX Trading Business
    • 3.1. The Financial Buyside: Creating an Agency-trading Spot FX Model
    • 3.2. The Non-financial Buyside: Enhancing the Quality of Sellside Relationships
  • 4.0 Client-to-Client Spot FX Trading is a Not a Reality, Yet
    • 4.1. Spot FX Brokerage Platforms: Close, but Not Quite Close Enough
    • 4.2. The Necessity of Independent Mid-point Price Providers
  • 5.0 Appendix
    • 5.1. Glossary of Terms
    • 5.2. Table of Figures
    • 5.3. Methodology