A new report from Aite Group examines the growth of the electronic FX market and looks at the potential market structure over the next few years.
The global FX market has become one of the most sought after markets on Wall Street, the report found.
Electronic trading in FX has been increasing at an impressive rate, Aite said. At the end of 2006, 66 percent of the FX inter-dealer market ran on electronic trading platforms. On the client-to-dealer market, approximately 45 percent represented electronic trading.
Overall, 56 percent of all FX trading occurred electronically at the end of 2006. By the end of 2010, Aite Group estimates that close to 75 percent of FX trading will be done electronically.
“Technology has played a crucial role in the evolution of the FX market,” said Sang Lee, research director at Aite Group. “Dealing banks, inter-dealer brokers, asset managers, hedge funds, and even the corporates have all successfully leveraged technology not only in terms of seeking competitive pricing and execution, but also in terms of post-trade processing, thereby substantially lowering inherent risks associated with global FX trading. Not surprisingly, the adoption of electronic trading has moved from a novelty to become a competitive necessity.”