e-FX INDUSTRY REPORT


E-Commerce - Capabilities and Practices


T Mike Hill, Director of Marketing, Caplin Systems Limited


During the second half of 2010, Lepus conducted a market research exercise, funded by Caplin Systems, assessing the current e-Commerce capabilities and practices at a variety of investment banks. The survey was designed to reveal where e-Commerce is being successful, where it’s not and what the future trends are most likely to be. The survey was partly statistical, with 30 responses from various types of trading firms around the world. The numeric research data was supplemented by a series of in-depth one-on- one interviews, which provide further anecdotal support to the conclusions. In this article Mike Hill explores some of the more interesting findings, concentrating on FX.


32 | april 2011 e-FOREX


he study we commissioned specifically excluded electronic trading of equities, since the electronic market in equities is already


mature and largely exchange-traded. We were particularly interested in finding out, in advance of any changes brought about by the current “tsunami” of regulatory legislation, about the current state of, and future plans for, electronic trading in OTC instruments.


FX - leading asset class in e-Commerce


Tere is a greater volume of FX traded via e-Commerce than any other asset class included in this study. Almost 90% of firms surveyed trade FX electronically (compared to almost 70% of firms trading rates and 35% of firms for each of Commodities and Credit). FX has also been traded electronically for longer than any other asset class. Almost 40% of respondents have been trading FX instruments electronically for more than 10 years, compared to around 30% for Rates – the longest of the other asset classes.


Trading volume trends


It’s clear from the research data that electronic trading is growing both in overall volume and as a percentage of all trading. Te report concludes that “the responses indicate a continuous migration towards electronic execution.” However there appears to be a different rate of migration depending on the size of the firm. Tier-1 banks indicated that the migration towards e-Commerce is steady but gradual, whereas the majority of respondents from the smaller firms indicate that they are seeing “continued and rapid growth,” particularly in FX.


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