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FX trading in emerging markets

As the FX volumes in emerging markets grow and are increasingly managed through electronic channels, what benefits does Refinitiv FXall provide to FX traders in these territories?

  1. FX trading in emerging markets has been slow to adapt to electronic trading, but growth in FX volumes means there is a need to efficiently manage these flows electronically. This process has been accelerated by the COVID-19 pandemic.
  2. In Morocco, a number of corporate clients are moving over to Refinitiv FXall, and away from voice trading. A crucial part of this growth has been that local banks have joined Refinitiv FXall as liquidity providers.
  3. In addition to providing liquidity, Refinitiv FXall also offers support services to clients that enhance operational efficiency and strengthen compliance.

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The FX market is already heavily reliant on electronic channels, with more than 80 percent of market volume transacted electronically.

However, emerging markets have been slower to adopt electronic trading, due to currencies being less liquid, more volatile, and dominated by either country-specific exchanges or voice traders.

Streamline your pre- through post-trade process, execute trades efficiently, access hundreds of liquidity providers, and get full trade decision support and post-trade functionality, including confirmations, settlement instructions, and TCA reporting with Refinitiv FXall.

FX volumes rise in emerging markets

That is now changing. Emerging market FX volumes have increased to 23 percent of all currency trading and there has consequently been a corresponding need to efficiently manage these flows electronically.

More recently, the COVID-19 pandemic has restricted the operation and availability of many voice-trading desks, which has accelerated the migration to electronic platforms. Increasing numbers of clients now have first-hand experience of electronic trading, so this trend is likely to continue.

The adoption of FXall in Morocco

Within Morocco, Refinitiv FXall has grown significantly in the past year. Large corporate clients have increasingly moved their trading activities away from the telephone and onto electronic channels.

These clients are attracted by end-to-end workflow efficiency, increased market transparency, meeting their compliance requirements, and access to trade a wide range of G10 and emerging market currencies that Refinitiv FXall provides.

However, the key to electronic trading adoption is ensuring that local banks are liquidity providers.

Where previously clients have had personal contact with local relationship banks and dealt over the telephone, an essential element of Refinitiv FXall’s growth in Morocco has been due to local banks joining the platform as liquidity providers.

Supporting relationship-based trading, Refinitiv FXall enables pricing to be provided by a large number of banks. It also provides a more efficient trading workflow, which frees up time to maintain relationships, and discuss risk management strategies with bank sales teams.

Refinitiv FXall now has at least seven local banks providing liquidity in Morocco including amongst others BCP, BMCE, and BMCI.

Accessing FX liquidity in emerging markets

For all market participants, access to liquidity is a core concern, especially during the current market disruption.

The quality of liquidity is also key, and accessing venues with significant market depth and price certainty is more important than ever. During the current disruption, Refinitiv has focused on increasing the volume of trading on its currency platforms. This has significantly improved emerging market liquidity, even in times of volatility.

Even during the highly volatile period in early March, when the dangers of COVID-19 became apparent, there was sufficient liquidity on Refinitiv FXall, due it being a relationship platform, with named banks providing clients with liquidity.

At the time, bid/ask spreads widened. However, this is to be expected when market volatility spikes, and more recently spreads have narrowed, especially for smaller trade sizes.

Due to the rising volume of emerging market FX – reverting to solely using phone trading is simply not an option, even during the current disruption. To support its clients, Refinitiv FXall offers deep liquidity on a robust and reliable technology platform.

How else can Refinitiv FXall help?

The availability and depth of liquidity are prerequisites for clients trading over Refinitiv FXall, but equally important are support services, which increase operational efficiency and strengthen compliance.

Refinitiv’s Trade Performance Analytics (TPA) is available to all Refinitiv FXall users and is particularly popular for corporate clients in Morocco as they assess the quality of their trade execution.

Driven by new regulatory requirements and heightened conduct standards, TPA allows users to assess the quality of their historical FX execution, conduct like-for-like comparisons of liquidity providers, and make better-informed trade-planning decisions.

Bank liquidity benefits

Refinitiv FXall also offers benefits for its bank liquidity providers. Providing access to trade with an expanded group of clients, and increased workflow automation, are particularly relevant.

However, many local and regional banks are using Refinitiv FXall as a more efficient way to trade with their regional subsidiaries, capturing all trading flows and replacing telephone trading between branches.

Refinitiv FX Matching provides access to firm spot and forwards pricing with a high certainty of execution, with approximately 900 client sites connected and almost 200 client sites trading through the FX Matching API.

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