Electronic trading proves irresistible
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Electronic trading proves irresistible

Electronic trading Percentage
of inter-dealer volume
Electronic trading Percentage
of dealer-to-client volume

Some 90% of trading of spot currencies in the interbank FX market is expected to be done electronically by 2007, up from today's level of 60%, according to new research. Boston-based research and consultancy firm Celent Communications also predicts that dealer-to-client volumes will be 70% electronically traded over the same period, up from 43% now. The inter-dealer spot market, which trades $301 billion a day, has historically had a higher adoption rate of electronic trading than the dealer-to-client market.

Bulge-bracket banks realized earlier on that technology could significantly reduce errors and improve efficiencies. They also realized that if they did not accept electronic trading and set up a platform they could own, then they risked Reuters dominating the business. So they created EBS in the early 1990s.

The inter-dealer electronic trading platforms are growing bigger and more liquid over time, which should attract more trading interest from the banks that are still conducting their largest trades over the phone, the report says. Although phone trading remains an important alternative for banks looking to trade odd lots or broken dates, new entrants such as eSpeed are now offering mixed lot and anonymous trading.

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