FX Trading Platforms: Models Converge and Competition Heats Up

by Arin Ray,  David Easthope, October 7, 2014
Product Trends/ Reviews
EMEA, North America

Abstract

The market for FX trading platforms is likely to become even more competitive as market segments blur. Improvements in technology and regulatory drivers are altering the competitive landscape.

In the report FX Trading Platforms: Models Converge and Competition Heats Up, Celent illustrates the evolution of foreign exchange trading platforms and resulting market structure due to regulatory and technology derivers. Key themes observed among FX platform providers are:

  • Increasing competition among interdealer platforms.
  • Increasing competition between single-dealer platforms and multidealer platforms.
  • Regional banks upgrading single-dealer platforms to protect and grow market share.
  • Expansion of product and client coverage by FX platform providers.

As a result of these themes, the traditional segmentation of interdealer, dealer-to-client, and retail market is blurring, with retail platforms going after the institutional market. At the same time, Institutional multidealer platforms operating in the dealer-to-client market are going after both ends of the market (interdealer and retail). Moreover, Interdealer platforms are acquiring dealer-to-client platforms.

“Regulations will be an important driver of change for the FX platform market,” says David Easthope, senior vice president of Celent’s Securities & Investments practice and coauthor of the report. “Regulations are discouraging large banks in principal-based trading and will result in more of them focusing on an execution-based agency approach.”

“Significant reduction in platform development time and cost has meant the barrier to entry for new platforms has been lowered,” says Arin Ray, an analyst with Celent’s Securities & Investments practice and coauthor of the report. “However, in an already crowded market, entrants will have to position themselves to attract volume and market share.”

The report begins with an overview of the FX market, looking at turnover composition and execution preferences. It then discusses the evolution of FX trading platforms over the last decade, and identifies the latest emerging trends in this area. In doing so, the report discusses 15 different FX trading platforms (interdealer, single-dealer, multidealer). Based on the analysis, the report sketches Celent’s outlook of how the future is likely to unfold for FX trading platforms.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Market Trends

1

 

Platform Evolution: Competition and Cross-Over Platforms

1

Introduction

2

 

The Blurring Market Structure

2

 

Report Scope

2

FX Market Overview

3

 

Turnover Trends and Growth

3

 

Turnover Composition

3

 

End User Preferences

6

FX Platforms Overview

8

 

Platform Wars

8

 

Evolution of Single-Dealer Platforms

8

 

Growing Competition Among SPDs and MPDs

13

 

Increasing Competition Among Interdealer Platforms

13

 

Expanding Product and Client Coverage

14

The Future of FX Platforms

17

FX Trading Platform Features and Functionalities

19

Case Studies of FX Platforms

23

 

Interdealer Platforms

23

 

Multi-Dealer Platforms

27

 

Single-Dealer Platforms

36

 

CME

38

Conclusion

41

Leveraging Celent’s Expertise

42

 

Support for Financial Institutions

42

 

Support for Vendors

42

Related Celent Research

43

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