Alan F. Schwarz CEO of FXSpotStream
Alan F. Schwarz CEO of FXSpotStream

The market shift from Anonymous to Disclosed trading

FXSpotStream, the current leading disclosed service in 2019, continues to experience tremendous growth. Through September 2019, FXSpotStream’s ADV is up 33% when compared to the same period last year. The growth of the Service is attributable in part to the shift in trading from anonymous to disclosed venues.

As FXSpotStream approaches its 8th year anniversary in December, it now counts on 13 global liquidity providers - Bank of America, Bank of Tokyo- Mitsubishi UFJ, BNP Paribas, Citibank, Commerzbank, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered, State Street, UBS – pricing clients out of its sites in NY, London and Tokyo. In August, FXSpotStream hit all new highs recording an ADV of USD43.2 billion and a total of USD951 billion in supported volume with an increase in its ADV year on year of 52.5%. 

When the shift from anonymous to disclosed trading started is not 100% clear, but Alan F. Schwarz, CEO of FXSpotStream, sees some evidence of a shift starting after the Swiss National Bank (SNB) removed the peg in EUR/CHF. Several market participants suffered losses resulting from the SNB’s surprise move and the event highlighted the need to know who participants were trading with and extending credit to. The shift in trading on a disclosed basis also comes at a time when there is increased need and interest in transaction cost analysis and with traders wishing to ensure that market impact, which is a significant issue for all market participants, is minimized.  

Schwarz is not of the view that anonymous trading venues will cease to exist as there’s a time and a place when trading anonymously is desired. However, the data shows that the volume supported by anonymous venues has shifted to single dealer platforms and multi bank venues. Clients are always looking to achieve the best execution possible and pricing over disclosed channels can achieve that purpose. Also, FXSpotStream’s unique business model helps banks reduce their costs of execution and in turn clients are expected to receive a better price than over other channels, including services offering a disclosed trading environment. 

“We have become the leading service when it comes to disclosed liquidity, and our model plays a significant part in our growth,” Schwarz says. FXSpotStream charges price-taking clients nothing to trade FX spot, swaps, forwards, NDFs and Precious Metals spot and swaps on its Service. Clients pay no commissions, hosting or data fees. Schwarz says, “Our banks pay a quarterly fee that is unrelated to volume. That means the more volume they transact with us, the less their effective rate per trade is, and ultimately that translates into better pricing for the end client. So, we remain fundamentally very different to any other service out there that supports disclosed FX and precious metals trading.”

Looking ahead, Schwarz sees more of the same with more clients looking to access their bank liquidity directly. When trading on a disclosed basis, client and their bank liquidity providers can discuss at the outset their trading needs and expectations. As the relationship evolves, the parties can make adjustments as needed. This means less surprises and the opportunity to raise a topic before it becomes an issue.