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Institutional FX Trading Platforms: Old Habits are Hard to Break

Institutional FX Trading Platforms: Old Habits are Hard to Break

The FX market is by far the largest and most liquid market in the world. At the end of 2006, 56% of FX trading occurred electronically. By the end of 2010, Aite Group estimates that close to 75% of FX trading will be done electronically.

By Sang Lee, Sang Lee

Boston, MA, May 7, 2007 – A new report from Aite Group, LLC focuses on FX electronic trading platforms and provides an evaluation of their future growth potential.

Technology has played a crucial role in the evolution of the FX market in recent years. Dealing banks, inter-dealer brokers, asset managers, hedge funds, and even the corporates have successfully leveraged technology, not only in terms of seeking competitive pricing and execution, but also in terms of post-trade processing, thereby substantially lowering inherent risks associated with global FX trading. Though the electronic FX market continues to evolve, it is growing in terms of diversity and functionality and is not moving into a centralized exchange model.

"While growth of leading ECNs such as Hotspot have provided the FX market with a glimpse of the future of FX market structure, a centralized single platform solution to the electronic FX puzzle appears to be years, if not decades away," said Sang Lee, research director at Aite Group. "The enormous size and the diversity in its market participants have enabled the FX market to bring about and nurture the growth of multiple execution venues. Despite the overall market success to date, there is a certain level of uncertainty over whether or not the FX market can continue to support multiple platforms as the convergence across customers' needs as well as inter-dealer and client-to-dealer markets increase over the next few years."

This 52-page Impact Report contains 44 figures and tables, and evaluates the growth potential of the leading electronic FX players: CME, EBS, Reuters, FXall, FX Connext/Currenex, Hotspot FXi, LavaFX, MilanFX, and FXMarketSpace. Clients of Aite Group's Institutional Securities & Investments services can download the report.