Anonymous FX market model mooted at Sibos

Anonymous FX market model mooted at Sibos

The extent of demand for anonymous, electronic trading in the FX market was debated during a lively panel discussion on e-FX at the Sibos event in Boston.

Whereas Mark Robson, chief executive of FX MarketSpace - the centrally-cleared platform developed by Reuters and the Chicago Mercantile Exchange - argued that the demand for anonymous trading was a key motivation for setting up the company, his fellow panelists were less convinced.

"The reason we set up FX MarketSpace was because the market was not happy with the level of anonymity," said Robson. "They don't want people backward engineering their algorithms. In our model there is only one participant seeing your trade."

Anonymous trading is prevalent in many other asset classes where liquidity is less pronounced than in FX and where participants are keen to lessen the market impact of their trades. But, according to Phillip Brittan, global business manager and head of FX at Bloomberg, anonymity is less important in FX.

"The FX market is so deep that access to liquidity is not a problem and it is very difficult to have an impact on the market. It is so distributed and overwhelmingly driven by relationships between liquidity providers and traders, often on a one-one basis."

Brittan referred to the various attempts that have been made to develop an exchange-based model for FX but concluded that they have all failed to attract users.

His views were supported by Simon Wilson-Taylor, executive vice president and head of Global Link at State Street Global Markets, who said that the preposition of FX Marketspace was perhaps indicative of the flaws in asking the market what it wants. "Sometimes the whole world can be wrong," said Wilson-Taylor, echoing the words of an earlier Sibos speaker, internet guru Nicholas Negroponte.

"Many of today's FX participants have come from other asset classes such as equities. Now many of them are learning that they need to develop relationships with their counterparties and are realizing that they can do their large trades quietly through their trusted counterparties."

According to the final panelist, Sandie O'Connor, global head of securities lending & execution products, JPMorgan Securities Services, even for those few FX traders that felt anonymity was important, the question really came down to whether FX traders would want an exchange providing the anonymity or a trusted counterparty such as a prime broker with whom a long-term and trusted relationship had been established.

After a quick show of hands, the views of the audience showed an overwhelming preference for anonymous FX trading. A clearly relieved Mark Robson welcomed the vote. "That's democracy in action," he said.

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