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Have Reuters and EBS lost control of FX?

The limited effects of a system breakdown at EBS suggest the two interdealer brokers no longer dominate FX price discovery. They had better watch out, there’s a new market paradigm on the block and it is hungry for their lunch. Lee Oliver reports.

IN A RECENT article for Euromoney’s weeklyFiX, Mark Warms, general manager of FXall’s European operations, highlighted the fact that many participants in the foreign exchange market believe that a new trading paradigm is starting to emerge. Does this mean that Reuters and EBS are losing their dominance in price discovery?

Until recently such a suggestion would have been summarily dismissed. The consensus was that although numerous viable trading platforms exist, ultimately they all depend on Reuters and EBS. The two electronic interdealer brokers have been routinely described as the market’s hubs, with every other platform effectively spoking off them. Pricing on every other platform was little more than a variation on the rates shown by the two brokers.

But a big system outage suffered by EBS in early March is evidence that a new market model is rapidly emerging. Such an event would once have resulted in a general loss of liquidity and a widening of prices but on this occasion some platforms, including those at the retail level, carried on working as if nothing had happened.

Tim Cartledge, Barx

"If a platform goes down, business switches elsewhere.

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