In our inaugural qualitative survey of buy-side customers representing more than $7 trillion in annual turnover, respondents were asked to forecast the breakdown of their FX turnover in the near future, rank their most important criteria in venue selection and name their preferred platform, both for single-dealer and multi-dealer portals.
Voice trading volumes are expected to decline to less than 15% of total volume in the next few years, as more bank trading platforms come online, and as previously bespoke currencies from the emerging markets are increasingly being traded electronically. The survey indicates that single-dealer platforms (SDPs) will be the main beneficiaries of this migration.
Key findings:
-The rate of growth on single-bank trading portals is expected to outstrip multi-dealer portals by almost seven times.
-Barclays Capital’s BARX and Deutsche Bank’s Autobahn trading platforms were the most preferred SDPs. FXall, 360T and Bloomberg’s FXGO were the preferred venues for multi-bank platforms.
-Choice of counterparty/bank relationship is the single biggest determinant of choice of trading venue where clients trade FX.
-Just under one-third of respondents said they had changed trading venues in the past 12 months
-Respondents expressed the importance of counterparty diversification as the European sovereign debt crisis impairs credit quality of some banks, indicating a greater need for credit and risk monitoring models.
- Application programming interfaces (APIs) – a huge growth area in E-FX in recent years – will slow due to technology budget constraints for clients and banks. Furthermore, API execution is now viewed as a less-effective execution method than single- and multi-dealer platforms.
-The demonstration of best execution remains one of the key reasons why clients use multi-bank portals. And single-dealer portals are beginning to offer best-execution reports on algorithmic execution trading tools (a key growth area on single-dealer platforms).