NASDAQ OMX Group is looking to enter the foreign exchange space, as the allure of FX trading and acquiring market share in the estimated $5.3 trillion-dollar-a-day market is attracting interest from the operator of one of the US’s largest stock exchanges.
Following reports by Reuters regarding the group’s interest to offer foreign exchange trading and clearing, Forex Magnates researched the developments to find out more about the exchanges reported plans.
Quoting one of the company’s executive vice presidents, Hans-Ole Jochumsen, Reuters said that he opined regarding the FX markets’ latest developments, “More and more people are talking about it being worthwhile to have products traded on a more transparent route,” and the quote to Reuters added, “There are some players who are tired of being bashed by regulators and politicians all the time, so I don’t think they want any more trouble.”
Following the reports, a Nasdaq OMX company spokesperson told Forex Magnates’ reporters, “We are looking into the FX space,” further confirming the reports of the interest the group has shown.
Considering the group operates some 60 locations across 26 countries for its multiple brands and products including the Nasdaq Stock Market in New York, for which it’s most well-known for.
Forex Magnates’ sources who are familiar with the developments said that the company’s European business is looking at both an exchange traded offering as well as an off-exchange or over-the-counter (OTC) solution within Europe, and attributed this interest as having been driven by executives on the OMX side of business in Sweden through their ties in Nordic regions where the group has relationships with 5 of the largest banks, such as Nordea, which is among the top 20 in Europe.
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Our sources said that these relationships with the Nordic bank for example, are probably a good starting point for a pan-European offering. Sweden is considered to have a market share of around 5% of global FX volumes, according to sources that Forex Magnates spoke with regarding this news.
Furthermore, sources close to the developments said to our reporters that while they weren’t yet familiar about any plans or interest in the group’s U.S. business, they added how the interest has been strong enough to merit some of the firm’s executives to comment on this to the media (such as in the above mentioned Reuters’ coverage).
Also something to consider is how the group’s technology structure, which already covers multiple markets and instruments across commodities, futures, options, bonds and other asset classes, is likely to build out an FX offering rather than outsource the development to a 3rd party or white-label solution or other Independent Service Provider (ISP), as told to Forex Magnates by people familiar with the group’s technology.
Vote of Confidence for FX Amid Market Challenges
In the end, while on-exchange and off-exchange products can each have their own inherent benefits or unique values, comparatively, and as certain OTC derivatives have shifted to a listed model, and in wake of ongoing foreign exchange probes of major dealers and recent regulatory fines against retail brokers for asymmetric slippage and best-execution related, the appeal of an exchange traded FX market has been hotly debated (including at prior iFX EXPO event co-organized by Forex Magnates, for example).
However, the market is still heavily traded in the off-exchange space, with on-exchange volumes representing a very small portion of overall global FX flows, however this could of course change in the future as recent regulations are causing centralized reporting and clearing for related products.
Finally, the interest shown in foreign exchange by a mostly security-focused exchange operator, such as Nasdaq OMX group, highlights the overall importance of FX in the investing universe of available products and related markets that appeal to brokerage offerings and their respective end-users.