The e-Forex Interview >>>
As the market continues to get faster some commentators believe that FX is locked in a technology “arms race”. Do you believe success in FX may ultimately be directly related to the level of IT and technology spend?
In order to compete effectively in the rapidly evolving FX trading environment, fast, robust, scalable technology is critical – and this requires significant, ongoing investment.
In order to further strengthen and grow our global electronic market business, ICAP invests heavily in technology, which includes our trading platforms. In the financial year to March 2011, ICAP invested 12% of its revenues in technology – and around GBP 1 billion since 2005.
But I don’t think this boils down to an arms race. A successful FX trading venue depends on much more than technology. We work closely with market participants to understand their requirements and aim to create a balanced trading ecology. Tis is part of our rationale for introducing systemic controls to EBS, such as a minimum quote lifespan (MQL) and fill ratio requirements, and why we constantly monitor platform activity. Technology is not an end in itself – it’s only as useful as the liquidity and counterparties it enables traders to connect to, which is what differentiates EBS.
In what ways are you seeing banks and FX providers in some of the leading emerging market economies keen to leverage innovations ICAP has developed on the EBS platform in other markets?
A key factor in our success in emerging markets has been our EBS Prime offering. For many regional banks and non-bank trading organisations, access to credit can pose a significant barrier to participating in the interbank FX market.
EBS Prime allows these customers to access EBS liquidity and trade on prices that might otherwise be unavailable to them, by enabling them to view the market through the pre-screened credit of an EBS Prime bank.
As part of our continued emerging markets focus we’ve worked hard to build Russian ruble liquidity on EBS, following the introduction of the ruble to the platform in late 2008, and we now offer a number of innovative ruble products. For example, we’re the only electronic OTC trading venue to offer the basket ruble hedge trade and this year we introduced the EMTA RUB Fix.
“As part of our continued emerging
markets focus we’ve worked hard to build Russian ruble liquidity on EBS, following the introduction of the ruble to the
platform in late 2008, and we now offer a number of innovative ruble products.”
I’m pleased to say that we’re now seeing the fruits of our labour. With the support of our customers, we saw strong growth throughout 2010 and 2011 and year-on-year – from January 2011 to January 2012 – ruble trading volumes on EBS have doubled and trading counterparties are also continuing to increase. EBS is now the leading electronic OTC trading venue for ruble globally. Offshore price making on the platform increased 50% over the last year, and most of Russia’s top 20 banks are now live on the platform.
As I mentioned earlier, NDFs are a key part of our emerging markets strategy and we hope to see the strong growth trend of recent months continue.
Where will you be focusing your efforts to further develop the emerging market capabilities of the EBS platform during 2012?
We recognise that growth in FX is likely to come increasingly from BRIC and emerging markets, as currency controls relax. A major challenge is how to develop solutions that satisfy often less-liberal local financial market structures and at the same time enhance trading opportunities for the wider (global) FX community.
april 2012 e-FOREX | 79
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