Losing market share

BATS Hotspot FX Volumes Decline in June, Lowest Since July 2014

Third consecutive monthly decline in the face of persisting forex volatility and year-on-year contraction raise some questions

The trading volume on BATS Global Markets owned electronic communications network (ECN) Hotspot FX declined for a third consecutive month, marking the beginning of the typical slowdown observed into the summer months. That said, in light of much higher figures across the industry, the year-on-year decline is a surprise.

The average daily volume in June totaled $25.7 billion, which is lower by 4 percent

The average daily volume in June totaled $25.7 billion, which is lower by 4 percent when compared to May, and by 6.5 percent when compared to a year ago, when the company was still under the KCG brand.

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In contrast to Hotspot, in recent months we have seen activity at other ECNs pick up materially when compared to last year. EBS is slowly experiencing a renaissance after it lost market share to Reuters and FXall throughout 2013 and 2014. The company’s latest figures for May unveiled year-on-year growth totaling 24 percent.

While there has been some substantial news on the market throughout the month, volatility was relatively subdued in June, save for the past couple of days with the Greek exodus reigning in. The trading range for the EUR/USD in May was about 650 pips, while in June it fell to 550 pips.

The Japanese yen traders have been more active, if the Tokyo Financial Exchange figures from June are any cue to the broad market. While traders remain focused on the conclusion of the year-long Greek debt saga, the activity on the foreign exchange market could remain vibrant.

Over the next couple of months foreign exchange ECNs and brokers usually register their slowest months of the year in trading volume terms. That said, over the coming quarters volatility is likely to persist as the European Central Bank (ECB) and the Bank of Japan (BoJ) continue their quantitative easing programs and the U.S. Federal Reserve prepares to raise interest rates.

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