e-Forex-Nov-23

FX Swaps
The only constant is change
e-Forex speaks with Stephan von Massenbach, Chief Revenue Officer at DIGITEC, about
the numerous changes that are taking place in the FX Swaps market. Stephan talks about
the increasing client demand for electronic Swaps prices, trader workflow automation,
implementing advanced technology to deliver accuracy and speed, making technology
available to regional banks using SaaS, and the growth of the interbank market.
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Additionally, the rise in interest rates
and longer-term yields has amplified
this move and contributed towards
increasing volumes in FX Swaps, as
far-side clients have sought to hedge
FX exposures.
As the FX Swaps market has grown,
clients have increasingly demanded
that their relationship banks provide
liquidity across multiple currencies and
tenors. When the market was smaller,
banks used to price FX Swaps manually
or use Excel, but the increased
volume of FX Swaps has led to more
electronic trading and an interest in
more efficient and scalable technology
solutions.
What is the impact of automation?
How is the FX Swaps market
evolving?
The latest BIS Triennial survey showed
that FX Swaps accounted for $3.8
trillion per day in April 2022. (See chart
on facing page).
Stephan von Massenbach
Traditionally, repos and money markets
were seen as important instruments
for firms looking to roll, hedge, or
fund their positions. Over the past few
years, there has been a sustained move
towards FX Swaps fulfilling this need as
a source of global funding.
The FX Swaps market is now at a point
where the majority of client trades are
electronic, and workflows automated
(to increase efficiency and make more
prices to clients). These greater levels of
automation and electronic trading have
led to increased market velocity, which
translates into a greater need for speed
and lower latency, as markets react
more quickly to events.
56 NOVEMBER 2023 e-FOREX