Harrel Smith Manager, Securities and Investments at Celent
Harrel Smith Manager, Securities and Investments at Celent

Foreign Exchange ECNs: The Limit Order Book model gains traction

Harrell Smith examines the growing importance of the ECN model in electronic FX trading.

The global FX markets are already huge, and growing at healthy rates. The most recent global market survey, conducted by the Bank for International Settlements (BIS), indicates that foreign exchange trades approximately US$2 trillion each day. As volumes surge and firms become more comfortable trading on electronic platforms, the buy-side and sell-side communities are rapidly increasing their use of e-trading services.Celent expects that over 90 percent of all inter-dealer volumes will be traded electronically by the end of 2007. The buy-side community, which includes both traditional assets managers, corporates, hedge funds and CTAs, is also increasing its use of e-trading platforms. Over the next two years, we expect to see dealer-to-client electronic FX trading increase from approximately 43 percent to over 70 percent of all volumes.Hedge Funds and CTAs take centre stageIt is not surprising that the fastest-growing segments of electronic FX market are hedge funds and CTAs. Both customer segments are...continued

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