What is the Euronext FX Dashboard and what are its unique selling points?
The new Euronext FX Dashboard was designed to support market participants in meeting best practice requirements, increasing market transparency for all market participants. It is unique in offering close to real-time information on market conditions, including Euronext FX ECN price movement, executed CLSSettlement-settled volumes, and metrics from the Euronext FX ECN reflecting volatility. As the electronic FX market landscape continues to evolve, one of the biggest challenges for market participants is how to meet the requirements of similarly evolving standards for execution, trading and disclosure, including:
- The FX Global Code, which sets out global principles for good practice in the FX market
- Regulators mandating Best Execution for clients
- Best practice and standards recommendations for trading practices, disclosure and execution, which are being published by industry working groups and standards boards, and which market participants are expected to follow.
These factors all have a direct impact on market participants when it comes to determining market conditions, understanding market liquidity and making logical execution decisions based on these elements, and this is what the Euronext FX Dashboard is designed to address.
The product has been delivered in collaboration with CLS, can you explain the background to this approach?
The collaboration with CLS is a very exciting aspect to this product. CLS has a unique position at the centre of the FX ecosystem with over 70 of the world’s most important financial institutions and over 25,000 third-party participants using CLS’s payment-versus-payment settlement system, CLSSettlement. With over USD 5.5 trillion settled on average every day, CLS has access to the largest single source of FX-executed data available to the market. By combining anonymised and aggregated intra-day CLS settled volume data with data extracted from the Euronext FX ECN, we are able to deliver meaningful near real-time information to our clients.
What form does the data available from the Euronext FX Dashboard take?
In the data visualisation tool, intra-day candle charts (O,H,L,C) act as a reference point for up to 30 supported CLSSettlement- settled currency pairs. For each currency pair, market participants have the ability to ‘temperature check’ the market in near real-time. They receive information on average realised spreads from the ECN, average quote rates per second from the ECN, executed CLS volumes and numbers of executed CLS trades. Data frequency alternatives of 5-minute or 60-minute intervals provide users with a choice of granularity. This insight into intra-day market activity is unequalled. We offer clients a choice of currency pairs, choice of data frequency, updates and choice of delivery mechanism. Data is available online via our website, or via API.
Can you expand on the potential use cases for the Dashboard?
Market participants faced with decisions on execution have many aspects to consider when seeking to achieve Best Execution for their clients: liquidity conditions, volatility, cost of execution, and more. The Euronext FX Dashboard gives users access to near real-time information on market volumes and market volatility, and in combination these can help support the decision-making process on execution style. On occasion minimal volumes can have a big impact on the market, and sometimes significant volumes have no impact. Liquidity assessment includes taking into consideration market depth and activity. As an example, market conditions where less aggressive algorithms, designed to minimise execution costs and market impact, are appropriate, differ greatly from circumstances when it may be more prudent to risk transfer using full amount liquidity or a more aggressive algorithm. The dashboard provides insight into near real time conditions, and the data we provide can assist in the decision-making process before execution takes place, and also act as a useful audit trail to help support those decisions once taken.
Is it fair to say that the Dashboard acts as a real time Transaction Cost Analysis (TCA) reference?
Yes, it is, and in this sense it is unique. There are many excellent products in the market that allow clients to closely measure cost of trading and market impact. The Liquidity Management team at Euronext FX use our in-house developed technology to do just that. Our global team of LM experts works closely with our clients to build unique, bespoke liquidity pools for this purpose, using many of these post-trade TCA metrics. The Dashboard differs in that clients have the ability to track near real-time market conditions pre-trade. We see this as a complementary product rather than a replacement for existing post-trade TCA tools.
Are there any ways in which the combined Euronext FX and CLSMarketData deliver additional market colour?
Indeed. Working very closely with our Euronext FX Data Scientists team, we have developed a proprietary algorithm that offers insight into potential forward-looking market movement, based on observations of historical behaviour. The assessment of potential market movement is non-directional but it can be used as a forward-looking volatility metric. The Dashboard makes a 60-minute forward-looking assessment that can be updated every 5 minutes using multiple data points, all available via API as well as our online dashboard. As an example, consider GBPUSD is trading at 1.4010:
- At the start of a 60-minute window we can assess the possibility for the market to move in either direction by + or – a specific percentage value (the % changes dynamically between 0.1% and 0.2% to reflect recent market conditions)
- For this example let’s use 0.1% or 0.0014
- The algorithm highlights the possibility that the market will move in either direction from the opening rate by > or < 0.0014 over the next 60-minute period
- The average accuracy for these expected market movements is typically more than 75%
- Clients who subscribe to our 5-minute data have this updated every 5 minutes and the potential outer ‘boundary values’ converge as the 60 min period elapses