Greenwich Associates Report: Plateau in Institutional FX Electronic Trading

The report indicates that, unless there is a change in underlying technology, FX volumes are unlikely to change.

This Thursday Greenwich Associates, a consulting firm, released a report detailing changes in the degree to which electronic trading is used by institutional investors. Most notable among the report’s findings was a plateauing of electronic trading in the foreign exchange (FX) markets.

The report may have been released now, but its data pertains to 2017. Over the course of the previous year, Greenwich Associates surveyed 8000 institutional investors working in fixed income, foreign exchange or equities.

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Our readership will most likely be interested in the FX markets. Greenwich Associates’ most recent survey on electronic trading was carried out in 2015. In that year, the management consultancy group found that 76 percent of FX trading was executed electronically.

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FX reaches its peak

Last year that figure did grow but only by one percent. Greenwich Associates’ report suggests that, at least for now, electronic trading in the FX markets has nearly reached its peak. The management consultancy firm noted that improvements in technology, for both liquidity venues and market participants, could see the level of electronic trading rising again in the future.

Electronic FX trading may have reached its peak for the moment, but other asset classes increased their electronic trading volumes more substantially. The level of electronic trading in cash equities and government bonds, for example, increased by four percent.

The total volume of electronically traded high-yield corporate bonds grew from nine percent to 14 percent. Despite this growth, the asset class remained by far the least affected by increases in the level of electronic trading.

It is more difficult to see how technological developments could cause any dramatic change in this case either. After all, if a market is illiquid, it’s illiquid. With non-standardised prices thrown into the mix it seems that for the foreseeable future, prices for high-yield corporate bonds will continue to be negotiated over the phone.

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