e-FX INDUSTRY REPORT
Year-Over-Year Percent Change in Trading Volumes
volume electronically, up from 74% in 2010, and fund managers/pension funds that trade electronically increased the share of overall FX volume routed through electronic systems to 61% from 57%. Because many corporations participate in FX markets on only a sporadic basis, just 52% of them use electronic FX systems. But companies that do use eFX increased the share of their total foreign exchange volume executed electronically to 61% in 2011 from 58% in 2010.
Hedge Funds slump
Electronic trading volumes decreased 7% among hedge funds last year. However, because that decline occurred against the backdrop of a 10% decline in overall hedge fund foreign exchange trading volume, the proportion of FX volume traded electronically actually increased among hedge funds to 45% of total market volume in 2011 from 36% in 2010. Te decline in eFX among hedge funds should not be taken as a sign of future direction in terms of demand. In fact, both the share of hedge funds trading on electronic systems and the share of total business executed electronically by hedge fund users held up relatively well from 2010 to 2011. Te pronounced slump in general hedge fund performance and foreign exchange market activity simply dragged down the absolute eFX volume totals last year.
Retail Aggregators: The Return
Te amount of FX trading volume executed electronically by retail aggregators increased 43% from 2010 to 2011, essentially mirroring the increase in overall foreign exchange volumes generated by these firms. Te spike in both overall FX and eFX trading
30 | april 2012 e-FOREX
volumes almost made up for the significant declines in activity among retail aggregators from 2009 to 2010 and served as one of the important drivers of the general recovery in global FX trading volumes last year.
A Multi-Dealer world
Te results of Greenwich Associates research point to a continued move away from bank proprietary trading systems by major FX market participants, even among the financial institutions that make up the majority of foreign exchange trading volume. Among financials, the share of eFX users trading on single-bank systems declined slightly to 53% in 2011 from 54% in 2010 and the share trading on multi-bank platforms increased to 78% from 75%.
Te move away from single-dealer platforms included customer banks, fund managers, pension funds, and even hedge funds, which traditionally have been heavy users of bank proprietary trading systems. While the share of hedge fund e-traders employing multi-bank systems held steady at 62% from 2010 to 2011, the share using single-bank systems dipped to 64% from 66%.
Te trend moved in the opposite direction for only two types of FX market participant: the market’s largest players and retail aggregators. In both cases, market participants are making heavier use of both types of trading platforms. Among market participants generating more than $50 billion in annual FX trading volumes, the use of proprietary bank systems increased to 54% in 2011 from 52% in 2010 while use of multi- bank systems increased to 85% from 81%. Among
Source: 2012 Global Foreign Exchange Services Study
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