REGIONAL e-FX PERSPECTIVE
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Spiropoulos says: “As the penetration of e-commerce systems is increasing in Canada, many users that first tended toward simpler RFQ-based technology solutions have started looking for systems with streaming prices and straight through processing capabilities. A small number of companies are using multi-dealer platforms, but most use a single-dealer platform for smaller transactions.”
“Large real money managers are ahead of the curve and large corporates are also jumping on the bandwagon. However, with the exception of these large clients, Canadian buy side clients are fairly traditional in the way they transact FX and still like to have a live contact,” continues Spiropoulos. “Tis started changing a few years ago and client demands for electronic trading are now rapidly evolving, mostly along the execution lines. Requests for e-commerce solutions are being received from top and mid market clients for smaller orders as well as crosses.”
Dmitry Evseev
Spiropoulos adds: “Clients are also requiring faster quote times which can only be delivered via electronic routing. Not only has price discovery become more important, but in fact many clients are now mandated to receive multiple quotes (at least two) on trades. Because of this dynamic alone, business transacted via electronic systems will continue to grow.”
Brokerage landscape
On how some Canadian brokerage clients have traditionally had their FX requirements catered for, and in what ways their demands for electronic execution solutions are evolving and are now being met, Evseev says that, “with new types of customers come new ways of doing business. In the past, the need for real time hedging of currency exposures related to stock trading was the domain of high frequency arbitrage firms. Tey possessed sufficient programming experience to connect executing algorithms to separate FX and equities electronic venues. Today, all these capabilities are now features sought by cutting edge retail brokers. Raising the customer service bar to provide seamless execution of equities trades on Canadian marketplaces is now the norm. Needless to say, this type of sell side service requires deep integration between FX and equities execution channels which must be supplied from a single location.”
Regulatory reform
As a G20 country, Canada is participating in the international initiative to improve market infrastructure and stability. Within the context of
60 | october 2011 e-FOREX “Retail forex has been noticeably absent from the
Canadian broker dealer landscape over the past several years, even though it has been increasing in other comparable jurisdictions across the globe.”
OTC derivatives, proposals are under consideration in both Canada and in other jurisdictions to improve standardisation and transparency and to encourage the use of central counter party clearing and electronic trading venues by the end of 2012.
Te expectation is that these reforms will ultimately lead to a significant transformation of these markets, as clearing and trading transitions from largely bilateral relationships to more centralised models.
Savoy comments: “Te foreign exchange market is already mature, efficient and transparent, and has been proven to function well, even in times of significant stress across the wider financial system. Frameworks have long been in place for centralised settlement, extensive electronic trading already occurs, and foreign exchange is, by its very nature, a global market. Having said that, Canadian public authorities have not released detailed proposals on proposed reforms to OTC derivatives, including the extent to which these proposals could have implications for foreign exchange markets.”
“Te Canadian Market Infrastructure Committee (comprised of RBC and other major Canadian banks and buy-side firms) is working closely with public authorities on these regulatory reforms. Consultations
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