EBS turnover bounces back as FX volatility returns
Volume on anonymous platform EBS Market has increased during recent volatility, while disclosed EBS Direct continues to gain traction in Commonwealth currencies.
EBS, Icap’s electronic foreign-exchange trading business, has turned the tide on a long period of falling volumes as increased volatility in its core currencies has led to an uptick in trading this year.
Average daily spot volume on EBS in February was $94.1 billion, up 13% year-on-year, while January’s average daily volume was $129.6 billion; a 48% rise on January 2014.
Gil Mandelzis, chief
However, EBS’s management team believes the increased volume reflects more than just a general rise in FX market activity. It highlights, they say, a preference to use more established platforms during times of acute market stress, such as the sudden decision by the Swiss National Bank (SNB) to remove its EUR/CHF currency floor on January 15. “The fallout from the SNB decision validated a key part of our strategy, which has been to make sure we continue to invest in EBS Market, our traditional central limit order book platform,” says Jeff Ward, global head of EBS Direct.
“As the market became very volatile on January 15, we had a very busy day on EBS Market and saw an increase in the number of clients and customer segments using the platform, as we have experienced previously in times of stress.”
EBS has been through a strategic change during the past three years, as it has diversified its business with the addition of EBS Direct, an increasingly popular relationship-based trading platform.
However, while volume on EBS Direct is said to be growing steadily, it is the anonymous platform EBS Market, and its associated market data, that tends to see a more marked increase in demand at times of stress.
“Even on quiet days, the reason major market participants buy and use EBS Market data is because it’s the venue where the most natural interest to trade resides – effectively the platform where the pebble hits the pond in terms of price formation in major currency pairs,” says Ward.
Despite the continuing importance of EBS Market as a primary FX platform, the expansion and diversification of the electronic broking business remains a priority for Icap.
In November, EBS unveiled plans to launch EBS Select, an anonymous, segmented liquidity pool in which customers can trade on a bilateral basis through a prime broker, while still retaining full anonymity. EBS Select will be available alongside EBS Market and EBS Direct through a new integrated portal, to be rolled out this year.
“The integrated platform will leverage our brand, relationships and global footprint to create a very advanced distribution channel that will allow us to deliver all kinds of new services to our client base,” says Ward.
“Having focused on a single platform for a long time, EBS has evolved into a multi-product business and this new front-end will be central to that strategy.”
While EBS Direct is only one component of the diversification strategy, it has fast become a jewel in Icap’s crown, nearly 18 months after its full commercial launch in November 2013.
In February, EBS Direct announced that Royal Bank of Canada had become its 19th liquidity provider and the first Canadian bank supporting the service, just months after Australia’s ANZ joined the platform.
Commonwealth currencies such as the Australian and Canadian dollars, traditionally the stronghold of rival Thomson Reuters Matching, are now among the most actively traded currency pairs on EBS Direct.
Its further expansion will include the addition of FX forwards and ultimately fixed income, as part of the planned integration of EBS and BrokerTec, Icap’s fixed-income electronic broking business.
EBS and BrokerTec were operated as a single business before the appointment of Gil Mandelzis as chief executive of EBS in 2012, but the recent decision to bring them together again could see a more complete integration of technology and services.
The joining up of EBS and BrokerTec has led to a number of senior staff changes at Icap, with the combined business to be run by Mandelzis as chief executive. Former BrokerTec chief executive Seth Johnson has stepped aside, but remains head of strategy for Icap global broking, while Richard Kerschner, head of corporate development at EBS, has been appointed interim chief executive of BrokerTec.
“This has been in the back of my mind for a long time,” said Icap group chief executive Michael Spencer in an investor call last month. “There is a symbiotic benefit to combining these businesses, which will allow us to expand our addressable markets and deliver many new products and services.”