FX Trading 2.0: Technology and Platforms

The Pools Merge
by Brad Bailey, November 23, 2015
Industry Trends
Global, EMEA, North America

Abstract

This report looks at the FX market, with an eye toward where the spot FX market is going. It briefly assesses the current FX market ecosystem including trends, market structure, and technology (aggregation, algos, and electronic trading) in light of global regulation, merging liquidity, and the changing competitive dynamics.

The cycle of change in foreign exchange, already rapid, accelerated in 2015. The ecosystem incorporates a variety of vendors across the spectrum: data, analytics, TCA, tools (connectivity, aggregation), nonbank liquidity providers, FX electronic venues, and the processing space.

The scandals of the past years, combined with major FX price dislocations, have driven wholesale change. All of this is happening amid regulatory forces surrounding spot FX, as well as tepid volume trends.

“The FX ecosystem is becoming more complex, with firms attempting to create better means of assessing FX trading opportunities via access to dealer, nontraditional dealer, and platform liquidity,“ says Brad Bailey, a research director with Celent’s Securities and Investments practice. “Many of the solutions sets for accessing the FX market are now available from single firms, which have become the new global megaplatforms. Concurrently, FinTech disruption and blockchain are becoming part of the FX conversation.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Market Trends

1

 

Key Research Questions

1

Introduction

2

 

FX Market Overview

3

FX Technology Taxonomy

5

 

Strategic Initiatives

7

 

The Future of FX Trading

12

Leveraging Celent’s Expertise

15

 

Support for Financial Institutions

15

 

Support for Vendors

15

Related Celent Research

16

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