What are the key industry themes for 2025?
We recently returned from Tradetech FX in Miami and there were three recurring themes that dominated panels and conversations in and around the conference.
Firstly, workflow automation is not a new theme for the FX market, but the pace of change is increasing as firms of all sizes try to automate every part of their trading workflows. In the past this was done to cut errors, increase efficiency and add scalability, but now it seems that workflow automation is less about optimisation, but very much needed for firms to stay competitive.
Secondly, managing market data is vital. With sophisticated models and pricing engines able to incorporate many different types of financial data from multiple sources, the value of market data continues to grow. As an example, in the FX Swaps market trading firms are now using our D3 pricing service to build their curves using data sources including FX Swaps and Forwards, FX Spot, STIR Futures, OIS, IRS and Cross-Currency Basis Swaps. As new data sources from different markets become available the more technologically advanced firms are subscribing to this data to give them an information and speed advantage in FX trading.
And thirdly, FX Swaps and NDFs markets continue to evolve. Year after year these markets are becoming increasingly electronic, with new liquidity pools launching and overall market volumes growing. The combination of more electronic trading and more liquidity pools means that accessing FX Swaps pricing is more efficient, which makes them even more attractive to trading firms and new entrants. The bank-to-client market is already highly electronic, but we are starting to see a growing interest in electronic trading in interbank markets like 360T SUN and LSEG FX Forwards Matching.
You launched D3 OMS at the end of 2023. What progress have you made automating the interbank FX Swaps market?
We developed D3 OMS to increase end-to-end workflow automation and enable traders managing FX Swaps risk to connect directly to interdealer FX Swaps venues and efficiently place and manage orders. Our first clients went live in 2024, and we now have firms enabled across all time zones. We expect more volume to migrate to electronic channels this year, as additional clients onboard and new interdealer venues emerge.
You have just launched a new service called D3 channels. Can you tell us about it.
D3 channels is the latest addition to our D3 suite of pricing tools, which includes D3 sheets and D3 curves, for FX Swap and NDF curve construction. We built D3 channels in response to traders and eFX businesses which wanted more control of the trader price element of their client pricing. D3 channels simplifies the management of volume- and tier-specific pricing adjustments that are applied after the core price for a currency pair has been built.
D3 channels allows traders to establish easily maintainable, rule- and scenario-based logic that automates pricing decisions based on tier, volume band, and destination. This ensures that the system determines the exact price to be sent in response to downstream requests, alleviating pressure on traders during potentially high-stress market situations. By providing greater control and visibility, D3 channels enables trading desks to scale their operations, moving higher volumes to electronic trading channels.
Importantly, D3 channels integrates with any D3 setup and in-house builds and connects to downstream systems. It enables traders to focus on executing active strategies rather than responding to individual requests, freeing up resources to expand into additional currencies and manage larger volumes effectively.
You previously mentioned that regional banks and smaller market participants have become an important target group for D3. Is that still the case?
Over the past year our client numbers have increased by 15 per cent, partially driven by regional bank adoption of our services.
In the past, many banks managed their FX Swaps books using Excel, which required high levels of manual intervention. However, now that FX Swaps and NDFs are priced more aggressively and many far-side clients transact in multi-dealer environments, regional banks are looking to technology that can help them to compete effectively for client business with more accurate pricing, and faster response times. It is now standard market practice for far-side clients to analyse quote quality, either directly or via trading venues, meaning that banks must have quote speed and pricing accuracy to keep their share of client business.
Additionally, DIGITEC’s products and services are delivered as SaaS solutions. This makes our suite of D3 pricing services more accessible and means that regional banks do not need to invest in on-premise technology. This makes implementation and any subsequent upgrades much more efficient. Many smaller regional banks initially use our D3 Lite service, which is a plug-and-play web-based application with some of the features of D3 accessible via GUI. They frequently see their FX Swaps and NDF business grow in volume as a result, and then upgrade to our full D3 pricing service as their businesses evolve.
Looking forward, how do you see the FX Swaps market evolving over the next year?
We expect the FX Swaps market to continue to grow and evolve in 2025 and we are continuing to invest and innovate in this area, as DIGITEC has done for 45 years. We are fortunate to have more than 50 per cent of the largest FX banks as our clients and SaaS deployment allows us to widen our potential client base far beyond the top 100 banks, which enables many more potential clients to participate in the FX Swaps and NDF markets.
As a specialist provider of technology solutions we are always aiming to set new standards in the FX Swaps market with our three core services – D3 sheets for improved curve construction, pricing accuracy and the subsequent distribution to downstream systems (including D3 curves and D3 channels), Swaps Data Feed for greater transparency and access to key market data, and D3 OMS to support the automation of interbank trading on electronic platforms.
