Electronic Trading of FX Options

Yana O’Sullivan examines the current level of uptake, the electronic only versus the hybrid route, and who are the leading players trading FX options online.

Several leading investment banks that actively trade FX options have detected an increased demand for the electronic trading of these products over the past six months. The electronic processing of spot FX trades has been so successful that many customers are now attempting to trade FX options online as well. Even those clients who are unable or unwilling to deal online just yet, have become keen on using electronic resources for conducting the sophisticated research required for FX options trading.Another factor contributing to this increasing demand is the gradual commoditisation of FX options. The products, which only a few years ago were viewed as exotic, are now regarded as being practically vanilla. Yet, the volumes of FX options still remain considerably lower than those of FX spot. Overall, the belief within the financial community still remains that the high volumes of FX and Money Market trading lend themselves to electronic trading, while FX options with lower volumes but greater average revenue on...continued

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