Are big FX banks need a new platform?


He adds that the current liquidity problem in the market there was not because EBS opened its platform to customers through its product EBS Prime, but because Deutsche Bank did not sufficiently distinguish who supplies their prices. "The situation [liquidity mirage] came because Deutsche Bank maintained too many platforms - they did not think about what they are doing. They let the genie out of the bottle, and now trying to get him back. "

There is no doubt that Deutsche Bank is the main opponent of EBS Prime, but he is adamant that it has a good relationship with the broker. "We are working closely with the EBS, to provide EBS Prime, if it is required by our customers," said a spokesman.

Even so, market sources are adamant that the bank does not like anonymous FX trading, and he is not alone in this, but it seems the only bank prepared to speak out. Although anonymity well on regulated exchanges, credit long played an important role in the FX market to manage prices. Even if the major banks recognize upcoming anonymity, it would seem that they are determined to delay the process.

The problem for the FX is that the market is stuck somewhere in the middle: some participants can trade anonymously on the major platforms, while others, especially the actual liquidity providers can not. But putting all the blame on EBS seems unfair. »Deutsche Bank does not seem to recognize that EBS is competing with other platforms and should respond to the threat," said the chief dealer at a British bank, referring specifically to the strong growth in the CME, as well as the threat from electronic communications networks, such as Hotspot.

EBS, at least partially opened its platform to the buy side, noticed that some of them are extremely aggressive. The result-buying side has gained an advantage. "Anonymity should not be selective. It gives an unfair advantage to certain hedge funds. If we put a price on to a large sum, one can see that for the dollar and euro, to see it - we, and if they think that we are helping to guide, turn around and move the market. Hedge funds do not face this problem. And they are not market makers - they do not provide a flow of prices. "

Justyn Trenner, director and head of the financial services sector consultancy ClientKnowledge, expressed similar views. "There is a very specific interest in participating in the buy-side platforms, market direction," he says. "Some of these parties are buying aggressively. They are not market makers. I think getting them, EBS has a really real conditions. Business buy-side that comes through EBS, may present significant challenges to the sell side. "

That might be true, but the real problem, it seems, is that the market can be accessed by a large number of entry points. Banks will try to absorb the flow, and when they can not cope with it, it will be reflected in the center of the market, possibly resulting in a discontinuity in prices.

The response to this is to reduce the large number of platforms. Market liquidity problem should not exist, because of its vast size. If it exists, it is only because the market had created it. The answer seems obvious - liquidity should be combined. But this is unlikely to be realized in the present. So the technology «smart order routing technology» touted as another possible solution.