There has been a bit of moaning and groaning going on about EBS’ plans to introduce greater order book transparency. I got a call last week from one old sell-side mucker asking me if I’d seen it. And I have – it was on full display in Icap’s lobby in London when I paid the broker a visit a couple of weeks back.
Almost a decade ago, I used to spend most of my day staring at Eurex’s Bund futures. I was struck almost immediately by the similarity of futures and what was then USD/DEM and is now EUR/USD. What I particularly noticed was that the depth of orders was seldom an indicator of which way the market would move next. The contract was and still is so liquid that natural interest could materialise at any moment.
There still seems an old-fashioned view that greater order book transparency will take out some of the skill of FX trading. It will certainly make some execution easier, but even if there are protests from its users, EBS really has little choice. If it does not change, the brave new world of algo trading – which is totally dependant on order book transparency – will see it lose volumes to those platforms that are more transparent.