e-Forex-May-23

Improving Execution Outcomes: How bright ideas and cutting edge technology are powering the evolution of P2P FX
Instead, these service providers
are delivering unique functionality
that boosts P2P’s appeal. Singleton
highlights Cürex’s efforts to maintain
a clean pool, free of hedge funds and
HFTs. Matching technology comes into
play here, something Singleton says
Cürex is highly devoted to.
“Cürex also provides an auditable
benchmark for all executions through
our proprietary benchmark calculations
with FTSE/Russell,” he says. “Our
Cipher analytics platform documents
the outcomes of customer trades in
relation to pre-trade market conditions,
including those trades resulting from
P2P matches.”
in place to access pricing. This creates
a bottleneck of liquidity amongst the
top-tier banks that have competitive
market-making capabilities AND the
resources necessary to onboard and
maintain a broad network of buy-side
relationships.”
He explains that P2P liquidity, and
swaps specifically, needs credit
intermediation since buy-side firms lack
credit relationships with each other
to settle trades bilaterally. Real money
buy-side firms do not use traditional
intermediation models thanks to credit
diversification requirements and broker
restrictions across their accounts to
consider.
banks can offer credit/settlement
services to our common buy-side
clients without the need to take
market risk or compete for liquidity.”
“This model allows our members to
match naturally offsetting liquidity with
each other, while distributing credit
across their familiar bank relationships
at fixed, transparent credit fees –
creating a new credit marketplace
in the swaps market,” he continues.
“This “novel, yet familiar” model has
allowed us to build a healthy balance
between serving the buy-side and the
sell-side simultaneously – optimizing
idle capacity and creating the space to
do more of what they do best.”
MARKET COMMENTARY
FX HedgePool’s focus on swaps
has forced them to look at things
differently. Moore explains that
separating credit from liquidity is a
critical innovation that FX HedgePool
has introduced to solve a longstanding
issue. “Historically speaking,” he
says, “there’s been a dependency
between liquidity and credit, which
is particularly relevant to swaps and
forwards. Buy-side traders rely on the
banks with whom they’ve got ISDAs
“We looked at things differently
and recognized that there are
several high credit quality banks
with balance sheet capacity, ISDAs
in place, and strong relationships
that were not meeting their
volume capacity. Leveraging the
documentation and risk management
framework of existing bilateral
trading arrangements, FX HedgePool
introduced the concept of credit-asa-service
(CaaS) where participating
RISING ELECTRONIFICATION AND P2P
As electronification rises in FX,
where does this leave P2P? Moore
is optimistic about its prospects.
“Given the growing volumes and
higher time demands on buy and
sell-side traders,” he says, “cost
management and automation
without compromising pricing or
transparency will be paramount.
Alternative sources of liquidity
combined with automation will be a
common theme – the space that FX
HedgePool is designed for.”
Singleton is similarly optimistic about
electronification assisting P2P’s
growth. “Peer-to-peer matching
can only exist in the electronic
environment,” he says. “We think
the buy side will focus on one or two
alternative solutions to maximize the
benefit of more volume matched with
no market impact.”
Ease of onboarding and access are critical to greater adoption of the P2P model
Time will tell how the P2P landscape
in FX changes and how successful
new approaches like Peer-To-Peer-To-
Bank are likely to become. Either way,
there’s no doubt that service providers
are constantly innovating to deliver
better experiences to their clients with
novel technology.
20 MAY 2023 e-FOREX