Interbank forex trading online set to soar
Electronic spot trading of currencies should reach 90 per cent of the massive interbank market by 2007, up from 60 per cent today, according to new research into the market.
The report by Celent, the research and consulting group, also predicted that 70 per cent of the market between dealers and clients would be electronic by that point too, compared with just 43 per cent now.
About $1,900bn is traded daily on the foreign exchange markets, of which more than $600bn is spot, where the currency is usually traded for delivery in two days' time.
The bulk of foreign exchange is traded between banks in units of at least 1m. Two electronic systems, Reuters and EBS, dominate. Traditionally, only the banks could get the best prices, and clients, including companies and institutions, phoned in orders to their bank.
But former "clients" now have much better access to the market through electronic trading platforms. The jump in volumes last year seen by a number of several providers was in part attributed to the effect of the increasing use of electronic trading in bringing new participants into the market.
Take-up of electronic and online trading platforms outside the interbank market was initially slow, as would-be users waited to see which would succeed.
Use of these platforms began to take off in the late 1990s during the internet boom as the banks automated basic trading functions and some standardisation of technologies allowed banks and clients to link up. Currently there is a variety of different trading models reaching critical mass in terms of trading volumes.
"At this point, it seems clear that the existing platforms are here to stay for a while," said Jodi Burns, author of the report.
The survival of different trading models belied early predictions that only a few would survive.
"Because these dealer-to-client platforms have each specialised in some way, either by customer base or straight-through processing services, the market is large enough, and growing fast enough, to sustain these existing platforms," added Ms Burns. FXall and State Street's FX Connect offer prices from a number of several different banks, while HotspotFX facilitates trading between funds and companies as well as with banks. Cantor Fitzgerald's eSpeed is set up like an exchange, with the platform serving as a central counterparty.
A sizeable amount of foreign exchange is still traded over the telephone, however. While common transactions have largely been automated, the phone is still used for more complex deals involving odd transaction sizes or less-traded currencies.
The report by Celent, the research and consulting group, also predicted that 70 per cent of the market between dealers and clients would be electronic by that point too, compared with just 43 per cent now.
About $1,900bn is traded daily on the foreign exchange markets, of which more than $600bn is spot, where the currency is usually traded for delivery in two days' time.
The bulk of foreign exchange is traded between banks in units of at least 1m. Two electronic systems, Reuters and EBS, dominate. Traditionally, only the banks could get the best prices, and clients, including companies and institutions, phoned in orders to their bank.
But former "clients" now have much better access to the market through electronic trading platforms. The jump in volumes last year seen by a number of several providers was in part attributed to the effect of the increasing use of electronic trading in bringing new participants into the market.
Take-up of electronic and online trading platforms outside the interbank market was initially slow, as would-be users waited to see which would succeed.
Use of these platforms began to take off in the late 1990s during the internet boom as the banks automated basic trading functions and some standardisation of technologies allowed banks and clients to link up. Currently there is a variety of different trading models reaching critical mass in terms of trading volumes.
"At this point, it seems clear that the existing platforms are here to stay for a while," said Jodi Burns, author of the report.
The survival of different trading models belied early predictions that only a few would survive.
"Because these dealer-to-client platforms have each specialised in some way, either by customer base or straight-through processing services, the market is large enough, and growing fast enough, to sustain these existing platforms," added Ms Burns. FXall and State Street's FX Connect offer prices from a number of several different banks, while HotspotFX facilitates trading between funds and companies as well as with banks. Cantor Fitzgerald's eSpeed is set up like an exchange, with the platform serving as a central counterparty.
A sizeable amount of foreign exchange is still traded over the telephone, however. While common transactions have largely been automated, the phone is still used for more complex deals involving odd transaction sizes or less-traded currencies.
posted by Drs Search @ 11:12 AM
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