FX: CLOB activity up, but pricing vs cost debate continues
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FX: CLOB activity up, but pricing vs cost debate continues

Central limit order book venues have done well during the past 12 months, but it would be premature to view this as a permanent shift in trading preference.

Illustration: iStock

FX trading venues using central limit order book (CLOB) systems to match buyers and sellers saw double-digit percentage increases in activity in 2022.

The CLOB approach, which is used by most exchanges and offers an alternative to asking for quotes, is what allows all kinds of participants to trade anonymously with each other and in real time. Trades are executed more quickly the closer they are to the best bid and ask at any one moment.

The importance of firm pricing in volatile markets was one of the factors driving the increases, say some market participants.

“Pricing or best execution will consider many factors, with spreads clearly being one of the most significant,” says Jeff Ward, global head of EBS at derivatives marketplace CME Group. “In addition, some customers value execution in primary markets, given the transparent nature of a central limit order book. We saw the return of clients last year who told us they lost out when volatility drove spreads wider on bilateral venues.”

While the speed of market data and execution has increased on the primary CLOBs, ECNs still surpass them when it comes to competitive pricing, flexibility, speed and execution options
Clinton Norton, Euronext

Some traders may think that CLOBs are more expensive than simply executing a risk-transfer trade with their chosen bank counterparty, but that would be painting too simple a picture, suggests Jamie Singleton, chairman and chief executive of Cürex Group, an FX-focused execution services and data analytics provider.


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