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.