FEATURE
FX Options – Increasing adoption of e-FX Options
With eleven banks pricing on the Digital Vega platform, daily trading volume across a range of currency pairs and structures, Suter says that adoption of electronic trading for FX options is steadily increasing as participants become more comfortable with online trading.
Frances Maguire
As advances in technology have meant that trading in vanilla FX options and structures is being more widely adopted, Frances Maguire looks at how pricing and execution on electronic platforms are now being enhanced.
a Swap Execution Facility (SEF) produced by the US regulator in 2010, because a SEF is exactly what he and his business partner had just built. “So theoretically we are almost compliant involuntarily, but the devil will be in the details,” Suter adds, much of which the industry is still awaiting.
I
t was with some incredulity that Mark Suter, CEO of the first electronic multibank FX options platform, Digital Vega, read the definition of
Apart from being a pioneer in the market, Suter puts the platform’s success down to the fact Digital Vega has become an accepted market standard – a disclosed model where banks know who they are dealing with and vice versa, and the number of banks a customer can request prices from is limited to five. He says: “Te systems supports a range a different pricing capabilities so in the first instance the customer is able to get a very good indicative price off the platform without actually ask anyone as we have our own market rates, market volatilities, spot, forwards and deposits so we can give the customer a very accurate indicative price on a range of options and structures.”
Customers can then choose up to five banks, based on currency pairs, and on strength of relationship, and modify this at any point. Te system also supports split requests and manual pricing from some banks, RFQ response and streaming simultaneously. FX options is benefiting from the browser-based
enhancing the pricing and execution experience of electronic platforms
However, the likelihood is that, along with clearing, FX options will have to be traded electronically and even as the industry awaits the final definition of a SEF, it is gearing up for a move to electronic trading.
46 | july 2012 e-FOREX
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