New look for foreign exchange trading

A new report from Greenwich Associates – Diversifying Liquidity: Attaining Best Execution in FX Trading – suggests that macroeconomic and regulatory-driven events are spurring a new wave of change in global foreign exchange trading. As a result, investors are increasingly focused on best execution by using sophisticated analytics to analyse existing trading relationships and engage with new counterparties.

Since 2008, buy-side trading handled by multi-dealer trading platforms jumped 32 percent, while phone-trade volume is down 50 percent, says Greenwich Associates. These changes occurred in tandem with an overall growth in investor electronic trading, which now accounts for 73 percent of volume executed annually, it adds. The result is a market where technology acumen is critical to long term success.

“Investors should work to gain access to multiple liquidity streams and ways of interacting with that liquidity,” says Kevin McPartland, head of Market Structure & Technology Research at Greenwich Associates. “Maintaining deep relationships with a few bulge bracket brokers is prudent, given the wide range of services they provide. But supplementing that with non-bank liquidity streams is now an important part of ensuring best execution.”