Icap’s flagship foreign-exchange business EBS is preparing enhancements to its growing relationship-based trading platform EBS Direct, as volume on the anonymous EBS Market platform continues to fall.
Having once achieved an average daily volume of as much as $274 billion, turnover on EBS Market dipped to a record low of $68.5 billion in April, rising marginally to $77 billion in June.
The decline has been attributed to a combination of low volatility in its core currency pairs and the rise of internalization among top-tier banks, as well as structural industry issues and the launch of competing platforms.
However, eight months after EBS Direct moved into full production, the platform is growing rapidly and attracting new participants to the business, according to Jeff Ward, global head of EBS Direct.
Average daily volume has grown by 70% month-on-month since launch, EBS Direct announced this week.
“What is happening in the market is not so much a migration from anonymous to disclosed liquidity, but rather just disclosed is growing a lot faster than anonymous and EBS Direct is certainly benefiting from that acceleration,” says Ward.
“We will launch a non-disclosed segmented liquidity offering through EBS Direct later this year. This will enable liquidity consumers to trade with liquidity providers they do not have a bilateral credit relationship with, using a prime broker.”
He adds: “We are also building a brand new front-end that will provide enhanced access to both EBS Market and EBS Direct for buy-side firms. It will be much easier to add new instruments and execution mechanisms to the new version.”
|Gil Mandelzis, chief |
ANZ last month became the latest liquidity provider to begin trading on EBS Direct. As the first bank to join from the southern hemisphere, ANZ gives customers access to a leading market-maker in key currencies, such as the Australian dollar, the New Zealand dollar and offshore renminbi.
“As users of the platform, we appreciate the value of relationship-based liquidity, ie better execution through deeper liquidity and tighter pricing,” says Luke Marriott, global head of wholesale FX at ANZ.
“The EBS Direct global distribution network is impressive – it allows regional banks like us to support the trading needs of a much wider client base with customized liquidity than would otherwise be possible.”
EBS Market has traditionally had a stronghold in currency pairs, such as USD/JPY and EUR/USD, while Commonwealth currencies have been mostly dominated by rival Thomson Reuters Matching.
However, EBS Direct has given the business a way into the Commonwealth currencies, says Ward.
“Some of our most active currency pairs on EBS Direct include AUD/USD, USD/CAD and EUR/GBP, which EBS Market has not traditionally been as strong in,” he says. “The pricing on the platform is also well inside the primary market and attracts new clients.”
Clawing back volume on EBS Market might be a greater challenge than growing EBS Direct. Last week, EBS revealed a management restructure after Nichola Hunter and John Schoen, co-heads of EBS Market, left the business.
EBS veteran Darryl Hooker, formerly head of strategic currency initiatives, now becomes sole head of EBS Market, while chief technology officer Viral Tolat becomes global head of product, while retaining his former responsibilities.
The restructure slims down EBS’s executive management team, which had expanded substantially since Gil Mandelzis became chief executive of the business in 2012 and initiated a series of changes designed to win back the trust of participants that had become disillusioned with the trading environment on EBS and the impact of disruptive behaviour.
Those changes included a new rulebook, the removal of decimalized pricing and the acquisition of ClientKnowledge, a research and advisory business, which led to the launch of EBS Liquidity Optimization, a new service providing banks with the necessary tools to provide enhanced pricing to clients.
“Over the past two years, EBS has transformed from a single-product to a multi-product company,” says Mandelzis. “We are live today with EBS Market, EBS Direct and EBS Liquidity Optimization, with new products and initiatives in the pipeline that will bring added liquidity to our customers.
“This requires us to think differently about product discipline, infrastructure, processes and technology.”
Hunter and Schoen had been jointly promoted to lead EBS Market in March 2013 and played a lead role in addressing what Mandelzis describes as an “extremely complex and challenging environment” for the platform.