Anthony Scholfield, Senior Practitioner, City Practitioners
Anthony Scholfield, Senior Practitioner, City Practitioners

The exchange model and FX: weighing up the challenges

Anthony Scholfield examines the factors that may move the FX market towards an ‘exchange model’ providing an open architecture and aggregated “one stop” liquidity, algorithmic order processing and central clearing facilities.

First Published: e-Forex Magazine 27 / Marketplace / April, 2007

Opinion is divided over the long term trend for e-commerce in FX. At present, a proliferation of single and multi-bank portals, interdealer portals and ECNs provide liquidity to a variety of users, including corporate clients, investment banks, central banks, as well as traditional or hedge funds and other speculators. Some industry commentators believe that the current model, with its multiple liquidity venues, is likely to continue, bolstered by growing global FX volumes and client reluctance to embrace new ideas. Others consider that venue aggregation is likely, following similar experiences in the equity markets, and that the market may even move towards an ‘exchange model’ providing an open architecture and aggregated “one stop” liquidity, algorithmic order processing and central clearing facilities.Many banks are preparing for both eventualities, pumping out liquidity to multiple channels and employing aggressive in-house development, including algorithmic capabilities. But, in...continued

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