Trends in FX Trading 2018

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The All-to-All Trading Wave Inundates Flow FX

This report evaluates the shifting market structure in the currencies market, with particular focus on the spot FX market. By evaluating 14 leading spot FX brokerage venues in 2016 and 2018, the analysis traces the increasing incorporation of non-traditional liquidity providers and broadening liquidity pool offerings of the evaluated multi-dealer platforms. These changes are contextualised as both drivers and results of changing FX trading business models among both buyside and sellside market participants, as well as the evolving FX e-trading technology landscape.

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The 2018 brokerage venue analysis shows continued migration toward A2A trading. Indeed, the acknowledgement and advertisement of A2A trading structures on the part of the evaluated brokerage venues aligns more closely with their A2A functionality than it has in the past as MDPs are increasing the number and range of flow and spot FX matching methodology functionality offered to users by expanding the range of liquidity pools on offer.

Currencies and cross-asset class trading business models on the buyside and sellside are changing in symbiosis with the market structure changes documented in this report. Tier I banks are increasingly forgoing the universal banking model in favour of regionalisation and specialisation. On the buyside, firms are increasingly explicit in differentiating between FX trading as an operational concern or as a strategic concern. These business model transformations are facilitated by an increasingly mature FX trading technology vendor landscape. In 2018, these vendors offer their solutions as either off-the-shelf systems, buy-and-build systems or development frameworks, all of which technology purchasers use to create modular technology stacks to serve particular business strategy needs.

Published on: 17 Dec, 2018

Trends in FX Trading 2018 – Table of Contents

  • 1.0 Flow FX Market Structure
    • 1.1 Spot FX Liquidity Fragmentation & Aggregation Within Venues
    • 1.2 The Evolution of Spot FX Liquidity Pool Functionality
    • 1.3 A Shift, Not an Extinction
    • 1.4 A2A Functionality & Acknowledgement Approach Alignment
  • 2.0 Shifting Flow FX Market Participant Business Models
    • 2.1 The Buyside
    • 2.2 The Sellside
    • 2.3 Conduct Imbalance & Transaction Cost Analysis
  • 3.0 The FX Trading Technology Landscape
    • 3.1 FX E-trading Workflows
    • 3.2 Purchasing Behaviour
  • 4.0 Appendices
    • 4.1 Glossary of Terms
    • 4.2 Table of Figures