Sucden looks to reduce FX pricing complexity, increasing volumes

The service provides users with the ability to price their own option structures online and benchmark those prices against independent data.

It offers more than 120 over-the-counter (OTC) FX option types, unlimited live streaming quotes for deliverable and non-deliverable FX pairs and more advanced technology, including multi-period hedging functionality, pre-trade analysis and risk controls.

While options offer companies greater flexibility to take advantage of favourable currency moves and can be a sensible hedging alternative to forwards when exposures are uncertain or the risk to the company is asymmetrical, they come at a price that has prohibited their use on a more regular basis.

According to Pritesh Ruparel, Sucden Financial’s head of FX options origination and structuring, increased trading volumes are evidence that reducing pricing complexity encourages clients to make greater use of options.

“Clients who may have only traded tens of options per year in the past now trade similar numbers every week,” he says.

Stephen Best, head of FX options at EBS BrokerTec, believes lack of data also negatively impacts volumes.

He notes that there is demand from liquidity consumers for indicative volatility data from trusted sources across all tenors, currency pairs and instruments, and acknowledges that better transparency fosters higher levels of confidence and, subsequently, more trading activity.