As FX trading evolves, markets are becoming more transparent and electronic trading more prevalent. How can Refinitiv help traders in the Asia-Pacific region access liquidity and improve workflow efficiency?
- In Asia-Pacific, FX markets are benefiting from the growth in electronic trading. However, this has caused the market to fragment.
- Banks and buy-side firms in the Asia-Pacific region need to establish a strategy that enables them to access the right FX liquidity.
- Refinitiv end-to-end workflow solutions help banks and buy-side firms make a smooth transition to electronic trading, enhancing operational efficiency reducing risk and saving costs.
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Electronification of FX markets in the Asia-Pacific region has become more widespread in recent years, driven by growth in overall trading volumes and accelerated by the COVID-19 pandemic.
The growth in electronic trading and recycling of liquidity has resulted in increasing fragmentation of the market, with many electronic venues or sources of liquidity available to market participants.
But managing multiple connections is inefficient in terms of resources and screen real estate and gives users only a limited view of prices and depth of market.
The use of algos is also gaining traction in Asia-Pacific countries as firms look for best execution strategies to save costs, minimise the market impact of larger trades and improve transparency and operational efficiencies.
Flexible electronic solutions such as those offered by Refinitiv are crucial to meet the challenges of trading firms in Asia-Pacific, where markets range from frontier to highly developed.
The right liquidity for local markets
Whether trading on a central limit order book, a relationship-based multi-bank platform, using algorithms or aggregation services, banks and buy-side firms in Asia-Pacific countries have a variety of different trading requirements.
Committed to accessing the right liquidity pools for its client base, Refinitiv has developed FX Aggregator, which enables clients to access market-leading FX liquidity from leading venues like Refinitiv FX Matching and Refinitiv FXall, as well as other sources.
The Refinitiv FX Aggregator is available as part of the suite of services available on Refinitiv FX Trading, which allows users to trade directly from a Refinitiv desktop and to eliminate the need for costly in-house infrastructure.
Offering a low cost of ownership, Refinitiv’s fully-hosted FX Aggregator gives all clients the same access to broad and high-quality liquidity across spot FX. It therefore provides regional market participants with the ability to trade on par with larger global banks, allowing for business and market growth.
With plans to extend the FX Aggregator offering to NDFs in 2021, Refinitiv will further enhance available liquidity in the Asia-Pacific region.
This market represents a significant trading opportunity, referenced by an IMF Working Paper published in September 2020, which stated that NDF markets in many Asian emerging market currencies are well established and rapidly growing.
In 2019, Refinitiv launched its FX Matching service in Vietnam, supporting the onshore interbank marketplace for the trading of VND. The service is also due to launch in Indonesia and Malaysia later this year.
Improving distribution and serving buy-side clients
The growth of FX electronification in Asia-Pacific promotes a larger and more efficient trading ecosystem, where market making banks are able to better service their clients, and the buy-side is able to operate more efficiently, demonstrating best execution and managing standardised workflows across multiple currencies and regulatory environments.
Electronification offers end-to-end workflow solutions allowing them to reduce risk, save costs and improve operational efficiencies.
As part of its commitment to the region, Refinitiv FXall is now onboarding more onshore market makers, with the aim of better serving both onshore trading centres and regional treasury centres.
Using Refinitiv FXall, banks in Asia can offer competitive prices in CNH and other currency pairs, improving efficiency and risk management for both themselves and their buy-side clients.
Refinitiv FXall offers a range of functionality for buy-side clients, from liquidity access to straight-through processing, allowing transparent trade execution in compliance with local regulations and codes of conduct.
New features of FXall, such as order splitting functionality are also highly beneficial to traders wishing to lessen market impact by working large trades over time using different channels.
Cost efficiency and flexibility are key to adoption of electronic trading. A significant advantage of Refinitiv FXall is the opportunity to manage without the need to replace an OMS, or for a corporate to use FXall with their existing TMS.
Promoting robust and transparent markets
Central banks in Asia-Pacific are supportive of the electronification of FX markets.
In addition to the need for increased market transparency and capturing data to evidence adherence with the FX Global Code (FXGC), they recognise that local currency settlement can only be achieved with reliable and accurate data feeds and market automation.
Using electronic channels enables firms to easily trade local crosses and settle in local currencies.
Reflecting the need to demonstrate compliance, Refinitiv FX Trading clients can use Deal Tracker, a fully-hosted archiving and compliance service, which includes timestamps and the ability to monitor fills.
Enhancing the ecosystem
As the Asia-Pacific FX ecosystem continues to evolve, Refinitiv is committed to enhancing and developing technology solutions, working closely with central banks, liquidity providers and buy-side firms to promote the development of efficient, fair and effective markets in the region.