e-Forex-May-23

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Stacking up the USPs of FX ECNs: Product diversity, flexibility and customisation help them to remain a compelling proposition for many market participants. SPECIAL REPORT FX ECNs Image by Shutterstock 50 MAY 2023 e-FOREX
SPECIAL REPORT Nicholas Pratt examines why the future of FX ECNs remains bright for those willing to grasp the opportunities. Nicholas Pratt Despite the results of recent industry surveys showing a decline in the volume of trades executed via ECNs, the value of the ECN proposition remains strong and compelling for many FX market participants, according to ECN providers. Semiannual FX turnover reports from the both the US and UK FX Committees, published in October 2022 showed that ECNs’ overall share of execution volume dropped and was outperformed by voice brokers. So how have ECNs responded to this data? “FX liquidity is still quite fragmented and all-to-all trading is getting more relevant with both buy-side and sellside participants needing to maintain a balance between best execution and profitability,” says Devang Bhatia, chief commercial officer at SGX CurrencyNode, an anonymous Asian FX trading venue, operated by Singapore Exchange (SGX Group) and hosted in Singapore’s SG1 data centre. “ECNs that can demonstrate unique liquidity especially in emerging market (EM) currencies like the Chinese renminbi (CNH), Indian rupee (INR), Indonesian rupiah (IDR), South Korean won (KRW), Taiwan dollar (TWD), Thai baht (THB), Philippine peso (PHP) and Singapore dollar (SGD), have all gained substantial volume and market share. ANONYMOUS TRADING SGX CurrencyNode was set up in 2022 to target clients looking for anonymity, deep liquidity, cost efficiency, consolidated relationships and price discovery. “Our clients have found ECNs to be cost effective as a single source of connectivity, therefore leading to reduced analytical effort and cost versus grappling with analytics across many bilateral connections,” says Bhatia. Since obtaining its Regulatory Market Operator (RMO) licence from the Monetary Authority of Singapore (MAS) in September 2022, its business has been on a healthy trajectory, with over 400% increase in its average daily volume between Q4 2022 and Q1 2023. “At SGX CurrencyNode we systematically and actively optimise flows to minimise market impact. Hence we are more adept at developing user-friendly algos that distribute orders in an aggregated liquidity environment than a client needing to balance between using conventional banks’ algos on their own,” adds Bhatia. Another market trend impacting the use of ECNs is the growing demand for NDFs – for example, the increased volume in FX futures for NDF currencies has made electronic pricing more fungible between ECN and listed markets, thereby giving a boost to the growth of NDF trading on ECNs. “Managing credit effectively, having the ability to switch between OTC and Futures and having solutions that can reduce credit utilisation is important,” says Bhatia. A case in point for fungibility is SGX FlexC futures which CurrencyNode offers customers who want to discover and match OTC pricing, but for credit optimisation, converts the OTC trade into an exchange cleared futures contract – making conventional OTC NDF fungible with FX Futures. Another key capability that SGX CurrencyNode MAY 2023 e-FOREX 51
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Page 5 and 6: Order Management System Supercharge
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Page 15 and 16: MARKET COMMENTARY Image by Shutters
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Page 23 and 24: REGIONAL E-FX PERSPECTIVE The Nordi
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Page 33 and 34: PLATFORM REVIEW volatile markets, a
Page 35 and 36: EXPERT OPINION DIFFERENTIATORS Not
Page 37 and 38: THE e-FOREX INTERVIEW A new chapter
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Page 41 and 42: THE e-FOREX INTERVIEW FXSpotStream
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