Dan Barnes
Dan Barnes

Resilience, Redundancy, Flexibility and Capacity: Can the Managed Service model meet the future needs of FX?

Dan Barnes explores some of the operational and cost benefits of the Managed Service model for both sell-side and buy-side FX trading firms and how it can specifically help them with their trade lifecycle operations.

Banks are getting smashed by regulation. Tier one firms report a drop in liquidity across even common currency pairs. The use of non-bank liquidity providers away from anonymous venues has increased, with volume traded up to 20% in 2015 from 16% in 2014, according to research from analyst firm Greenwich Associates. Some 50% of trading by volume is now conducted on multi-dealer platforms but with eight platforms capturing between 4% and 12% of trading volume, only FXAll with 25% presents a significant aggregator. This fracturing of historical relationships and increasing diversity of trading partners is challenging for firms trying to capture liquidity without significantly increasing operational costs. That is not easy when there are so few players exerting enough dominance that there is no risk associated with connectivity. Moving away from the single-dealer model may increase the likelihood of best execution, but that requires an initial outlay. Connectivity options Determining the best model for...continued

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