The Paz Activity Curve is a novel way to visualize FX turnover by type of economy, and offers timely insights regarding the post-Brexit reshuffle of FX trading operation desks.
Retail trading of leveraged products such as contract for difference (CFDs) and retail FX have experienced a steady growth in recent years. Forex Datasource estimates that retail brokerage firms generated trading revenue of as much as US$9 billion in 2018, with US$7.3 billion occurring outside of Japan, compared to global revenue of US$1.5 billion in 2003.
The bloated list of 44 FX multi-dealer platforms shrinks in half if we isolate unique MDP franchises. As to why we observe such a high number of E-FX venues and why we may yet see a few more MDPs arrive ꟷ particularly in the APAC region ꟷ the main driver is clear: Increased regulation of OTC FX at the regional level and still ongoing merger and acquisition activity.
The vibrancy of Japan’s brokerage scene takes place within a credible regulatory environment and begs the question of how industry and regulators were able to strike a balance that achieves sensible industry growth. Japan’s retail FX trading has reached highs of US$250 billion per day, and it has been adopted by roughly 7% of the country’s adult population and 15.5% of the population holding investable assets.
Best execution in foreign exchange (FX) encompasses a number of steps taken at various times: pre-trade, at-trade, and post trade. To achieve best execution systematically, sophisticated buy-side and corporate users generate a set of best execution policies and deploy tools that help achieve that end, while measuring policy compliance and alpha generation.
This paper examines CLS, central bank, and Bank for International Settlements data to illustrate how average trade size in the over-the-counter (OTC) spot FX market varies longitudinally, by time of day, by FX pair, and by factors such as counterparty type and use of prime brokers.