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Tailored approach to circuit breakers ‘hampering demand’ for exchange-based FX trading

The lack of a unified approach to circuit breakers in the FX market is said to be reinforcing loyalty to OTC trading and stifling enthusiasm for exchange-based activity, despite the protections such mechanisms can offer.

The FX market has experienced notable periods of stress in recent years, albeit not on the scale of the Swiss National Bank’s decision to abandon its peg to the Swiss franc in 2015.

For example, during the January Yen move, the market traded more than $1 billion in USD/JPY on EBS Market in less than a minute.

However, while Euromoney has previously reported on ambivalence towards circuit breakers as a mechanism for reducing market risk, opinion seems now to have hardened against these ‘collars’. This comes despite the ambition to grab a larger share of the FX market shown by exchanges – a trading environment where circuit breakers are well established.


Curtis Pfeiffer,
Pragma Securities

“It is a significant challenge for systematic circuit breakers to be employed uniformly across the FX market,” says Curtis Pfeiffer, chief business officer at Pragma Securities. “Instead, each venue and liquidity provider has to create their own circuit breaker, which creates inconsistencies and additional complexity for market participants.”

Circuit breakers have traditionally been used by exchanges, perceived as efficient marketplaces.

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