The London-based capital markets consultancy’s new paper, Trends in e-commerce and electronic trading, is the outcome of 10 months spent surveying buy-side and sell-side firms, including banks, leveraged funds and software vendors.
This year’s Euromoney FX Survey revealed that e-trading across FX markets made up 56% of overall turnover.
The trend towards near-universal e-trading is being driven by three factors, says Frederic Ponzo, a managing partner at GreySpark: client demand, bank competition and regulatory pressure.
The buy side is increasingly demanding electronic interfaces, both screen and API-based, in both a pre-and post-trade environment, the report found, making it easier to integrate with single-bank or multi-dealer trading platforms.
However, the emphasis varies across segments, says Ponzo: “Real money and corporates are particularly keen on electronic interfaces for post-trade functionality. They are still broadly fine with voice trading.”
Hedge funds, while favouring electronic execution, still delegate clearing and settlement processes to their prime broking banks manually, Ponzo adds.
He argues that competition among banks to reduce costs per ticket can only improve through e-trading too.
On the regulatory front, the EU is keen for all phone trading to migrate to organized trading facilities to make it easier for regulators to monitor, the paper suggests.
For FX options trading, the trend will be still more pronounced, as the market prepares for mandatory clearing in the US and Europe. “All FX options will be cleared within 18 to 24 months. That's the market expectation,” Ponzo tells EuromoneyFXNews.
Most remaining phone-market deals will be long-tenor or highly structured transactions, Ponzo concludes.