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Platform propaganda

Someone is putting about the suggestion that a new market paradigm has emerged.

According to the whisperer, the main loser is Icap’s EBS spot platform. This surprises me, but if it was true it shows just how quickly the FX market is evolving. It only seems like yesterday that I argued that EBS, which at the time was still predominantly owned by its user banks, had the potential to be the de facto FX market.

However, while EBS remains the biggest single pool of spot liquidity, things have clearly changed substantially since it was set up to prevent Reuters from achieving hegemony in FX. Where it once had an effective monopoly on the bulk of trade in currency pairs such as USD/JPY and EUR/USD, it has been facing competition from other platforms as well as – more significantly – from its former owners, the banks.

There is no doubt that EBS did lose market share before it was sold off to Icap, primarily because it was slow to react to change while it was run as mutual. Similar events took place on various exchanges, which had to demutualize too to survive.

Icap insists that EBS is not losing market share; a claim that will be verified either after the next set of central bank data on market turnover is published or after the next BIS triennial survey comes out and we can see how the others are performing.