The world of multi-dealer platforms (MDPs) continues to evolve and, with it, capital markets microstructure. Recent merger and acquisition (M&A) activity is causing us to expand our definition of the term MDP to include not just over-the counter (OTC) venues but also regulated exchanges, electronic broking venues, swap execution facilities (SEFs), multi-lateral trading facilities (MTFs) and even select industry utility firms as long as these intermediaries offer clients a trading front end/API and trade matching from their liquidity pool drawn from multiple dealers.
Some of the recent M&A activity has been in response to strategic threats posed by large firms growing trading volume at double digit rates annually, while another known goal was for major stock exchange groups to own a piece of the OTC FX marketplace. Examples of the M&A trend include: Cboe Group’s acquisition of BATS (which includes Hotspot, now known as Cboe FX), Deutsche Borse’s purchase of 360T and Gain GTX, Euronext’s acquisition of Fastmatch, and CME Group’s acquisition of NEX Group.
The top three FX MDPs in the space (Bloomberg FXGO, FX Connect, and Thomson Reuters’ FXall) have their respective “sticky glue” to draw in/retain coveted buy-side clients. The Bloomberg FXGO franchise has been on a tear in recent years while the largest E-FX firm (Thomson Reuters) is having a banner 2018, a reality not lost among anxious peers.
Select questions answered in this study include:
This report relies on the latest trade activity data either publicly-available or made known to Forex Datasource by E-FX firms mentioned in the report, while also bringing to bear the author’s 13-year experience professionally researching FX MDPs. Prior to this report’s publication, midsized and large E-FX firms were given the opportunity to provide color/corrections of our estimates of their firms’ respective historical ADV growth and FX product adoption path. The list of firms mentioned in the report include: B3, BGC (also owner of GFI), Bloomberg, Cboe, China Foreign Exchange Trading System (CFETS), CME Group, Cürex Group, Deutsche Börse, Euronext, FX Spot Stream, Integral, LMAX Exchange, Moscow Exchange, NEX Group, R5FX, Thomson Reuters (owner of FXall, Reuters Conversational Dealing, and Thomson Reuters Matching), State Street Bank (owner of FX Connect and Currenex), Tradition (owner of its own SEF and ParFX), and Tullett Prebon (also owner of ICAP).
LIST OF CHARTS AND TABLES
Chart 1. Number of E-FX MDPs by ADV Brackets, 2008 to e2018
Chart 2. Number of MDPs by FX Product Specialty
Chart 3. E-FX MDP ADV Growth: 2008 to e2018
Chart 4. Relative Size of the Top 5 E-FX Firms and their MDPs, e2018
Chart 5. Five-Year Trend in FX Methods of Execution
Chart 6. E-FX Market Share Rankings, 2018
Table 1. MDPs by ADV Brackets, e2018
Table 2. Evolution in FX Product Focus – Select Cases
Table 3. E-FX MDP: Past M&A Activity
Table 4. E-FX MDP: Prospective M&A Activity
OTC FX markets are notoriously opaque and this poses a challenge to executives needing to carry out investment decisions involving M&A activity, or revamping FX product choice and functionality. This report offers the needed visibility into the OTC FX MDP space to justify high-value investment decisions.
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