Electronic Currency Derivatives: prospects for the future

Frances Maguire asks if the FX industry will ever successfully trade FX options electronically or if the hybrid model is here to stay.

First Published: e-Forex Magazine 31 / FOCUS / April, 2008

The hotly contested debate over whether electronic options can ever truly be traded electronically, without the need for any telephone negotiation, is continuing as some in the industry are just getting on with moving first generation and the more vanilla options on to the screen and letting time, and fast-moving technological developments, take their course in enabling more complex products to slowly move away from the  hybrid model. Last year GFI Group took the decision to open up its interbank options hybrid trading system, ForexMatch, to selected hedge funds, bringing to the FX market the closest it has to an ECN. Evgeni Mitkov, manager, electronic trading, at GFI Group says that technology gains in recent years have made it possible to trade options electronically, in real time. The key driver of growth in electronic trading is the demand for a liquid multi-contributor electronic FX derivatives market, similar to spot, from traders. Mitkov says: “FX options growth has been restricted...continued

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