Reporting publicly about volume performance executed on its Medusa multi-dealer FX-options platform, Digital Vega has announced it achieved over 160% year-over-year growth for 2014. Trading is provided via FIX API or Medusa’s front-end user interface, and includes both pre and post-trade order management and trade allocation features. Counting State Street and Deutsche Boerse as minority owners in the firm, Digital Vega utilizes technology and other features of the two firms in their FX options business. As an example, Medusa includes integration with State Street’s Currenex platform for traders who desire the availability to access the spot FX markets in tandem with their options positions.
The volume growth occurred as recent statistics from the Bank of England’s Semi-Annual FX Survey revealed that FX options trading on multi-dealer platforms surpassed those of single-dealer platforms for the first time. The interest in multi-dealer platforms shows that traders are finding value in receiving aggregated pricing of FX options liquidity.
As a sub-market of the larger foreign exchange industry, the FX options sector has traditionally been fragmented with traders connecting directly with individual dealers. However, like in other assets, with trading of options becoming electronic, it has made it easier for traders to monitor pricing from multiple dealers as well as for platform providers like Digital Vega to create multi-dealer networks.
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Explaining the evolution of FX options trading to Forex Magnates, executive chairman of Digital Vega Mark Suter stated, “The option market is replicating how the spot market developed; more smaller trades started being covered electronically, but as users become more confident and banks continue to invest in their risk management systems, the amounts are increasing as is the level of complexity of the transactions.”
When asked what types of trades remain voice driven, and whether they will eventually go electronic, Suter answered, “There are always going to be very large trades that will not go over platforms as they need to be ‘worked’ in the market; this is still the case in the cash markets, but as both clients and banks are looking for cost savings and increased efficiency, more and more flow will migrate.”
Commenting more about the role of electronic trading as it is shaping up in the FX options market, CEO of Digital Vega Nick Lukic stated in the firm’s public remarks, “As FX Option trading increasingly migrates to electronic trading channels, driven by a combination of greater transparency and cost savings on one hand and further regulatory pressure around best execution, users have started to focus on automating the entire trade lifecycle.”
Speaking about their growth and ability to scale FX options liquidity from multiple sources on a single platform, Mark Suter stated in the firm’s public remarks that “[they] have always been at the forefront of what was a fledgling market, and based on last year’s strong performance, [they] have proven the model conclusively and have achieved critical mass both in terms of available liquidity and client adoption.”