Earlier this month, the CLS Bank published its November figures of FX trades submitted for settlement. According to the data, average daily volumes fell 2.2% from October to $4.89 trillion from $5 trillion (volumes are double counted representing both sides of the trade being submitted for settlement). The month-over-month contrasted with reports from public reporting venues such as the CME, EBS, Thomson Reuters and KCG Hotspot, which all saw volumes improvements during November. As CLS Bank volumes are primarily derived from single-dealer platform (SDP) activity, the decline in trading represented outperformance for multi-dealer platforms (MDP). Although also reacting primarily to FX volatility, SDP volumes during 2013 have been much more consistent than those at MDPs (see chart).
On initial inspection, the MDP outperformance appeared to be tied to institutional traders favoring the public ECNs; the euro saw a pick-up of volatility in the beginning of November; typically leading to reduced levels of market depth on SDPs and smaller ECNs. On a second look, it appears that this wasn’t the case. In the recently published ‘Market Report’ from the CLS Bank, it shows that November’s decline was primarily the result of a 6.2% decline in MoM FX Swap ADV to $781 billion (single-counted). On the other hand, FX Spot ADVs rose 5.1% to $827 billion, representing the SDP market rising in November alongside its MDP brethren. Overall, despite the proliferation of MDP platforms in the market, SDP volumes continue to demonstrate slow and steady growth taking place; representing the central place relationships play in the FX Spot market.
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