Trading volumes in emerging market currency pairs are expected to flourish as a multi-dealer trading platform, Currenex, which will provide traders accessibility to seven new currency pairs. Emerging market countries have seen a rise in activity after developed markets saw a slowdown after the 2008 recession, the boost in fixed income and equities trading has bolstered FX trading in the crosses.
Currenex adds new currency pairs to its current diverse selection of crosses. The firm reported, in a note to clients, that it is launching a range of Asian and European instruments. The seven pairs include; the CNH China yuan renminbi, CZK Czech koruna, HUF Hungary forint, PLN Polish zloty, RUB Russian ruble, THB Thailand baht and the TRY Turkish lira. The new crosses are currently not traded through the CLS system, however the growing demand in the pairs has impacted the firm’s decision to launch the instruments.
The Rise of EMFX
The global FX trading landscape continues to evolve as trading conditions alter investor behaviour. Emerging market crosses have seen a spike in the number of contracts that are available to traders. A number of developed and developing derivatives exchanges have launched EMFX futures contracts, the SGX was the latest venue to launch RMB currency futures.
Official data from the BIS shows that EMFX are jumping on the band wagon. The Chinese yuan has been the best performing currency of the seven pairs added to Currenex system, in the last triennial survey it entered the top ten international currencies traded.
New Currencies & Global Rankings (BIS 2013)
Currency Pair Ranking Market Share
CNH China yuan 9th 2.2%
RUB Russian ruble 12th 1.6%
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TRY Turkish lira 16th 1.3%
PLN Polish zloty 22nd 0.7%
HUF Hungary forint 24th 0.4%
CZK Czech koruna 26th 0.4%
THB Thailand baht 27th 0.3%
In the same survey the average daily trading volume in the respective currencies were noted, in the USD/CNY (including CNH) $113 billion was traded with 2.1% global market share. China’s fellow BRICS nation Russia saw $79 billion in the USD/RUB cross, the Moscow Exchange has also seen an uptake in currency futures traded. The Chinese yuan and ruble both have been slow to enter the international foray, however the Turkish lira has been traded internationally for a number of years, the USD/TRY trading $63 billion in daily volumes.
Currenex Innovating E-FX
Currenex has been one of the most successful platforms in the institutional FX sector, the portal offering users a number of key functionality with both executable streaming prices and requests for quote. Users also benefit from the ladder picking system that gives oversight of the full order book.
Currenex was one of the first platforms that offered trade settlement and confirmation services at the latter stages of the last decade, thus allowing both counterparties of trade to hold useful order information. Currenex came to market during the midst of the e-trading phenomena twenty years ago, its founders re-branded the initial portal to Currenex in 2000. The multi-bank FX platform exchanged hands with one of the world’s largest custodian banks, State Street, in 2007 for $564 million.
The Thai baht and Turkish lira have both been swinging aggressively on the back of political situations. Currenex’s enhanced product offering will benefit the margin FX sector as brokers will take heed of new liquidity and price providers.