FX Mythbusters: Defending the value proposition of Single-Dealer Platforms

Patrick Myles, Chief Technology Officer at Caplin Systems answers some questions on the subject of Single Dealer Platforms.

We are uncertain about whether to go down the multi-dealer or SDP route. Does any recent research indicate whether global trends in FX (particularly with respect to Forwards and Swaps) are favouring one against the other as the buy-side continues to adopt e-trading channels?  It really depends who your clients are and where they trade. FX trading data from the Bank of England show that between April and October 2011 there was a marked decline in volume traded on MDPs by both the buy side and downstream banks. You also need to consider that trades on SDPs are typically more profitable than those on MDPs. We are unclear about the overall benefits of channelling flow through a SDP rather than a MDP. Relationships and adding value for clients are certainly important but isn’t pricing equally vital for most FX providers like us?  Our customers have often found that trading on their SDP saved the commission costs of an MDP, so they were able to offer a better price to their clients and...continued

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