Hotspot FX Volumes at Lowest Level Since 2012 with 8.6% MoM Decline in July
- Volumes on the Hotspot FX platform are at multi-year lows but the problems may be more than just a summer slowdown for the ECN FX platform.
After experiencing three consecutive quarters of solid FX volume results between Q3 2014 to Q1 2015, activity at Hotspot FX has been on the decline. The fall continued in July, as average daily volumes (ADV) for the month were 8.6% lower than June to $23.51 billion. The figure was the lowest recorded month ADV at Hotspot since December 2012.
The multi-year low occurs as most trading venues and broker have experienced a drop off of volumes from Q1’s levels. However, Hotspot specifically has underperformed its rivals. Like Fastmatch which has been unable to return to volume levels prior to January’s Swiss franc Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, Hotspot appears to be similarly be affected by changes taking place in the FX market.
Specifically affecting many players has been a contraction of credit available from major foreign exchange prime brokers (FXPB) as well as higher commission prices from them. As a result, many buy-side funds have received termination notices from their FXPB’s or instructions to increase collateral. In relation to Hotspot, the FX ECN may be affected by this changing climate in the industry if their clients are among those scrambling to source new credit relationships to trade on the platform.
Speaking with representatives of BATS Global, they responded to Finance Magnates that they don't pin the drop in volumes to any specific reasons other than market fluctuations. They added though that for BATS, Hotspot remains a long term business acquisition, of which the month to month performance is less important than their overall longer term strategy, of which includes the coming launch of a London based matching engine.
(Correction: an earlier edition of this story incorrectly stated that Hotspot FX had banned the use of 'last look' quoting, but in fact reduced the amount of time certain types of Market Makers Market Makers Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Read this Term have to approve or reject 'non firm' quotes)
After experiencing three consecutive quarters of solid FX volume results between Q3 2014 to Q1 2015, activity at Hotspot FX has been on the decline. The fall continued in July, as average daily volumes (ADV) for the month were 8.6% lower than June to $23.51 billion. The figure was the lowest recorded month ADV at Hotspot since December 2012.
The multi-year low occurs as most trading venues and broker have experienced a drop off of volumes from Q1’s levels. However, Hotspot specifically has underperformed its rivals. Like Fastmatch which has been unable to return to volume levels prior to January’s Swiss franc Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, Hotspot appears to be similarly be affected by changes taking place in the FX market.
Specifically affecting many players has been a contraction of credit available from major foreign exchange prime brokers (FXPB) as well as higher commission prices from them. As a result, many buy-side funds have received termination notices from their FXPB’s or instructions to increase collateral. In relation to Hotspot, the FX ECN may be affected by this changing climate in the industry if their clients are among those scrambling to source new credit relationships to trade on the platform.
Speaking with representatives of BATS Global, they responded to Finance Magnates that they don't pin the drop in volumes to any specific reasons other than market fluctuations. They added though that for BATS, Hotspot remains a long term business acquisition, of which the month to month performance is less important than their overall longer term strategy, of which includes the coming launch of a London based matching engine.
(Correction: an earlier edition of this story incorrectly stated that Hotspot FX had banned the use of 'last look' quoting, but in fact reduced the amount of time certain types of Market Makers Market Makers Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Read this Term have to approve or reject 'non firm' quotes)