SDPs vs. MDPs in the fight for FX volume share
|Source: Bank of England revised data; Celent|
In September, Deutsche Bank unveiled a new API for its FX trading platform Autobahn called Rapid after three years of development. Rapid is set to substantially increase client trading volumes, and the bank says it hopes to have between 50 and 100 clients using the facility by year-end. In January, Citi launched the latest version of its SDP called Velocity 2.0 offering clients prices that update 92 milliseconds faster than on any other SDP. Barclay’s is planning to release enhancements to its Barx platform later this year, sources say. And UBS is developing a new SDP platform called Neo. Meanwhile, the MDP space remains dominated by six players – FXall, Thomson Reuters, FX Connect, Reuters Dealing 3000, Direct and 360T – that provide 90% of the volumes, says Celent. However, with the barriers to entry into the FX dealer platform space falling by 80% during the past seven years, there is more space than ever for new MDPs in the market, says the Celent report. Between May and June, a plethora of new MDPs emerged, including FxSpotStream, traFXpure, Molten Markets, FastMatch, FTSE Curex, smartTrade Technologies’ LiquidityFX and JFX.com’s Jiffix Markets. With competition in the MDP space tighter than ever, the Celent report says that a platform launch can only succeed if it builds volumes quickly – especially in spot FX flow. However, success will breed envy among the incumbent platforms, and they will likely begin working soon to gobble up the competition where possible, says the Celent report.
This means that new MDP entrants must work to specialize where possible in bespoke services for FX options and other products, developing expertise that could guarantee their long-term survivability or attractiveness to potential buyers, the report concludes.