The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Foreign Exchange

Banks offer consistently cheaper FX liquidity than ECNs, says Pragma

Banks consistently offer more competitive prices in spot FX than their ECN counterparts — for all but a few minutes per day — according to research conducted by Pragma, a provider of algorithmic trading technology.

While a single bank may offer a less competitive price than an ECN (electronic communication network) for any given pair at any given time, taken as a group banks overwhelmingly and consistently offer a better price for liquidity, Pragma says.

Pragma reported having found only three instances of multiple banks ceasing quoting during periods of high volatility in 2015 and 2016: the de-pegging of the Swiss Franc in January 2015; the extreme volatility of the New Zealand dollar in August 2015; and the sterling flash crash in October 2016.

For a market that is open 24 hours a day, for five and a half days per week, and in a period that has been characterised by significant political turbulence – especially in Europe and the US – that is surprisingly consistent.

Pragma concluded that events in which banks actually stop providing liquidity are exceedingly rare, and tend to be “due to operational and technical issues that do not reflect an intentional withdrawal of liquidity.”

The depegging of the Swiss franc was by far the most extreme of the three instances and it took six months before liquidity provisioning by banks returned to normal levels, says Pragma.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree