The race to redefine FX trading is on. According to the recent Coalition Greenwich report, multi-dealer platforms (MDPs) are poised to overtake single-dealer platforms (SDPs) in spot FX trading in 2025 – a stark reversal of recent years where SDPs dominated. 

Amid these changes, banks need to adapt so they can meet their clients wherever they are and deliver on best execution requirements. To get ahead of the competition, banks need to upgrade their technology to enable faster price discovery, bespoke price creation and improved risk management. At the same time, we’re seeing more sophisticated buy-side firms utilising API first architecture to directly embed banks’ services and functionalities into their own workflows, creating new opportunities for dealers, provided they have the right technology.  

The message is clear: future success hinges on mastering MDP, SDP and API trading ecosystems. The key lies in leveraging venue-neutral, multi-channel technology to build a robust distribution platform. From there, banks can focus on delivering a unique trading experience tailored to their clients – on any platform, in any environment. 

Mark Suter, executive chair, Digital Vega 

In 2025, we expect the see the FX options market automate further, with more regional and private banks implementing workflow automation technology solutions. As their clients want to trade electronically and trade sizes reduce, many banks are having to implement technology to manage a larger volume of price requests and more tickets to process. A key focus for Digital Vega in 2025 is to continue to roll out our white label electronic platform to client banks. This increases workflow efficiency and capacity, and also allows banks to price trades themselves or source prices from our multibank platform, which enables increased currency coverage. 

Next year will also see the full production launch of our FX options CLOB. We have spent a long time developing the platform and conducting client testing but held back from a full launch until we could rely on deep liquidity on day one. Now we have most of the main trading firms connected we expect to launch in early 2025. As the CLOB makes interdealer trading more efficient we think that the whole of the FX options market will benefit from increased liquidity and overall volumes will grow as a result. 

Stephan von Massenbach, chief revenue officer, DIGITEC 

The FX swaps market is migrating to electronic channels, and we expect the pace of change to continue through 2025. Clients want to trade FX swaps in multiple currencies, and tenors beyond overnight and tom-next, and banks will only be able to service clients efficiently by implementing scalable technology solutions, where workflows are largely automated – in data, pricing, distribution, and settlement. Also, the velocity of the underlying market has increased which means that banks using Excel to manage their FX swaps books are now turning to technology solutions to keep pace. SaaS technology deployed in the cloud has reduced the investment required to provide accurate and fast FX swaps pricing. 

Interdealer FX swaps trading, which is dominated by the broker market, has begun to migrate to electronic venues, like 360T SUN and LSEG Forwards Matching. We expect more volume to migrate to electronic channels in 2025. 

David Mercer, chief executive officer, LMAX Group 

The foreign exchange (FX) market remains a cornerstone of global trade, yet its pace of innovation lags other areas of capital markets. Despite representing the lifeblood of international economies, significant portions of the market remain untouched by the latest technology and innovation. This leaves ample opportunity for modernisation through blockchain technology as we see increasing fusion between TradFi and decentralised finance.  

Simplified and automated solutions could transform FX, enhancing global price discovery and market access. Looking ahead, there is enormous potential for decentralised models to reshape FX as we know it. Tokenisation would facilitate more dynamic and transparent trading, addressing inefficiencies and increasing participation from diverse players. As sovereign nations strive to maintain control over their currencies, FX innovations can bridge the gap between national interests and meet the demand for a seamless global marketplace. 

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Despite the relative calming of FX volatility compared to 2022, the management of currency risk was still a top priority for fund managers throughout 2023. Our own research found that 82% of North American and 77% of UK fund managers were affected by USD and GBP volatility respectively, clearly highlighting that fund managers aren’t out of the woods yet when it comes to the threat of currency movements. While there will always be some that don’t hedge at all, many are deciding to hedge a higher amount of exposure to protect their returns. Likewise, rather than using long-dated FX forwards of up to a year or two, many fund managers chose to lock in rates of up to six months or less to add an extra layer of flexibility and nimbleness should the market move against them.

Despite the renewed focus on FX risk management, many fund managers still rely on manual legacy systems which can be cumbersome and inefficient. As a result, we can expect more firms to begin embracing new technology to automate their FX operations, helping them save much-needed time and resources and manage FX risk more effectively. Whether volatility will significantly increase again in 2024 is somewhat beside the point. The more important factor at play is underlying desire that funds have to keep the impact that FX has on their P&L to a minimum in the context of ongoing macro uncertainty. This uncertain climate, combined with the opaque nature of the FX market, means that we would expect firms to continue focusing on FX risk management.

Paul Houston, global head of FX products, CME Group 

Given all the uncertainty in the world and in business, risk is likely to remain a dominant theme in 2024. That goes for all markets, including FX swaps where it will be more important to manage short term interest rate risk. The evolution of the FX swaps market is at an important turning point, with many participants looking to electronify and optimise what has traditionally been traded on an RFQ or RFS basis, as well as demanding much greater price transparency. As the landscape continues to evolve, we expect greater client interest in hedging FX swap risk, both spot-starting and forward starting, via FX futures in 2024.

Stephan von Massenbach, chief revenue officer, DIGITEC

The FX swaps market is evolving quickly and we expect the pace of change to continue through 2024. As clients look to FX swaps as a source of global funding, there is demand for relationship banks to provide liquidity across multiple currencies and tenors. With this demand, banks will only be able to service clients efficiently by implementing scalable technology solutions, where trading workflows are completely automated – in data, pricing, distribution, and settlement.

In 2024, interdealer trading of FX swaps, which has traditionally been dominated by the broker market, will start to migrate to electronic venues. 360T and LSEG offer electronic interdealer FX swaps trading venues, and many other marketplaces are looking into establishing new and additional venues. As the FX swaps market grows, we expect to see regional banks trade more FX swaps. In the past they could not justify the investment in on-premise applications, but with SaaS apps deployed in the cloud, they are increasingly adopting FX swaps pricing technology to service their clients.

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Named D3 OMS, the platform combines position management, risk management, OMS and EMS functionality to allow workflow automation to increase, while also giving traders the ability to connect and place orders in the interdealer FX swaps market.

AT launch, D3 OMS is connected to 360T SUN and LSEG FX Forwards Matching, with additional venues set to be included at a later stage.

“Increased client demand for FX Swaps pricing has led banks to automate their trading workflows in a drive for efficiency. The volume of data required to make accurate FX Swaps prices along the curve has moved the industry towards a data-driven approach,” Stephan von Massenbach, chief revenue officer at DIGITEC, told The TRADE.

“Interdealer FX Swaps trading has stayed largely manual due to the current market structure and use of voice brokers, but increased regulation, better technology access via the cloud, and the need for transparency are driving change towards a more electronic market, while trading volumes continue to increase.”

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Chris Povey, executive director, CME Group:

Stephan von Massenbach, chief revenue officer at DIGITEC: The latest FX triennial survey data showed continued growth of FX swaps, despite this part of the market still being very manual. The overall theme for 2023 will be the continued automation of FX swaps, which will drive electronification and volume growth, with technology playing a key role. One of the main drivers of electronification is the need for banks to more accurately price FX swaps in the volatile interest rate environment and the need to capture and use high quality market data. As FX workflows become more automated, more data than ever before is being analysed in search of better trading and execution. Systems must be capable of managing vast amounts of data at higher levels of intensity. In the past this was usually done using Excel, but increasingly those spreadsheets are being replaced with more robust systems. Another driver is the growth of the cloud, where powerful cloud-based FX applications are more accessible, meaning that an increased number of smaller banks can support more currency pairs and efficiently make more accurate prices. As more firms participate in the FX Swaps and NDF market we expect to see increased trading volumes and an acceleration towards a more electronically traded landscape.

Balraj Bassi, co-founder at Tradefeedr: As FX firms focus on increasing efficiency and demonstrating best execution, data analysis continues to be important for all sizes of trading organisations. Where 2022 saw the majority of buy-side firms use data analytics for transaction cost analysis (TCA), 2023 will see more advanced functionality including, for the first time, the analysis of different trading algos under different market conditions. The FX market continues to be highly fragmented, which used to limit the effectiveness of data analytics, with multiple different data formats coming from a wide variety of venues and liquidity providers. During 2023, we will see more buy-side firms demanding a single, consistent and independent view of their trading data, irrespective of where they trade – a trend that has been growing over the past year. With this better-standardised data, market participants gain new insights and ultimately make better trading decisions.

Vikas Srivastava, chief revenue officer at Integral: The return of meaningful volatility to the FX markets, perhaps for the first time in over a decade, has made it much harder for firms to obtain optimal pricing. Investment managers, particularly those heavily exposed to sterling/dollar (GBP/USD) and euro/dollar (EUR/USD), have had to deal with significantly higher levels of volatility. Those with broad connectivity to liquidity sources and automated workflow have found the recent volatility to be quite manageable. In order for the fund managers to achieve best execution in 2022, they need advance technology that enables them to minimise both the explicit and the implicit costs of trading. With market volatility is unlikely to go away, cloud-based technology provides flexibility and resilience in accessing the right liquidity even in turbulent times, allows for optimal netting and comprehensive execution methods tailored for different currency pairs and trade sizes.

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Amongst the new appointments is George Procopiou, who joins the firm as client and sales enablement manager.

Procopiou brings 14 years’ experience in FX and FICC client management to DIGITEC, having previously served at IHS Markit, Societe Generale and Anglo Irish Bank in various client-oriented roles.

Anil Jassi also joins DIGITEC as client and sales enablement manager, with a particular focus on FX client sales.

Jassi previously worked in e-FX and FX corporate sales at Deutsche Bank and Moneycorp.

Alongside Procopiou and Jassi, Liudmila Artyukhina joins DIGITEC as another client and sale enablement manager.

Artyukhina has been promoted to the role after working at DIGITEC for the last four years, previously serving in IT and product management. As part of the promotion, she has been transferred to London from DIGITEC’s Hamburg office.

Finally, Ioulia Grant has been appointed to the role of product owner.

Grant brings 15 years’ experience in e-trading product management and software development, from various positions at Bank of America, HSBC, and Lloyds Banking Group. In addition, she also worked in relationship management at Hotspot and CMC Markets. 

“Making these key hires in London brings us closer to our clients and new prospects, which is key to DIGITEC’s future growth,” said Peer Joost, chief operating officer of DIGITEC. 

 “The first step was to bring in Stephan von Massenbach to open the London office and now we have a team of people with extensive financial markets experience to manage relationships, onboard new clients and enhance our range of products.”

All four appointments will be based in London and will report to von Massenbach, chief revenue officer at DIGITEC.

DIGITEC’s London office acts as a key component of the firm’s global growth strategy, allowing it to be closer to its London-based clients and prospects, as well as offering access to various regional FICC trading hubs.

“With an experienced new team in London we are able to engage with more clients and capture the market’s demand for automated FX Swaps and NDF trading,” said von Massenbach. 

“Many of our new employees have cross-asset experience and numerous industry relationships, which also helps to enhance our products to include pricing precious metals, interest rates and crypto assets.”

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