Skip to content

How to access liquidity in fragmented FX markets

Bart Joris
Bart Joris
Head of FX Sell-Side Trading Proposition Management, Refinitiv

In emerging markets, the shift towards FX electronic trading platforms has caused market fragmentation, increasing workload and costs for financial institutions. How can aggregators, such as the Refinitiv FX Aggregator (i.e. product available in 2021), help traders access liquidity?


  1. FX electronic trading is becoming more prevalent in emerging markets, caused by growth in currency trading, greater transparency and the migration to electronic platforms spurred by COVID-19 and technological evolution.
  2. However, this trend has resulted in fragmentation in EM FX trading markets, and has made it more difficult for financial institutions to connect their systems to these trading platforms.
  3. Refinitiv FX Aggregator (i.e. product available in 2021) enables seamless access to liquidity. It allows flexible choice of venue and execution management options to trade forex straight from the Refinitiv desktop. Clients can connect Refinitiv venues, as well as third-party venues (such as CBOE FX, EuronextFX, B3 and MOEX) offering the widest choice of access to liquidity on the market.

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

The FX market already has a heavy reliance on electronic channels. More than 80 percent of spot market volume is transacted electronically. As the market continues to evolve, new trading venues have emerged, which focus on different products or currencies, or even supporting new trading styles.

Electronic trading satisfies the requirement to capture accurate data and report it to regulators and compliance departments, combined with the need for liquidity, and the incessant demand for increased efficiency in the middle- and back-office.

Workflow efficiency will drive the wider adoption of electronic workflows for many in the market, and the buy-side will increasingly migrate to automated trading models.

FX Trading Platforms: Solutions to help you carry out your end-to-end workflows for trading forex

FX electronic trading in emerging markets

Emerging markets (EM) have been slower to adopt electronic trading. Currencies are less liquid, more volatile, and dominated by either country-specific exchanges or voice traders.

That is now changing.

With emerging market FX volumes increasing to 23 percent of all currency trading globally, the need to efficiently manages these flows electronically has also increased.

FX markets have become more transparent, and consequently electronic trading will increase. This fuels price discovery and allows the electronification of more players in the FX market, creating a domino effect.

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

On top of this, continual technological evolution has made electronic trading solutions cheaper and more readily available to everyone. The result is a highly fragmented FX market with over 100 electronic venues, with each offering a unique workflow or liquidity edge.

Even though the market concentrates around a smaller number of venues, fragmentation is a significant industry trend. Concerns about the total cost of ownership (TCO) may inhibit further fragmentation, but they are not yet able to reverse the trend.

Why is fragmentation such a problem?

Managing multiple connections to FX venues is inefficient, takes up valuable screen real estate and presents users with only a limited view of prices and market depth. But perhaps more of an issue is the time and workload required to connect to a venue’s API.

The problem faced by many sell-side and buy-side financial institutions is that they are struggling to connect their systems to these trading venues. Many of them have slightly different workflows or different APIs for trading and market data, meaning that trading on a single FX venue may require connecting with two or three different API specifications.

Connecting to any one of these venues takes too long and is too expensive. The process typically takes 3-6 months and is resource intensive to maintain. Venues periodically upgrade APIs to add functionality or new fields, including for regulatory reasons. It takes time and resources to code and test before updated systems can be released into production.

The scale of the problem becomes apparent when you multiply the workload required to connect to a venue by the number of venues on which you want to trade.

Navigating a fragmented market

Aggregation is not a new concept, but its importance has increased significantly as the number of venues has grown. It provides access and a consolidated view of the FX market, which increases transparency and offers algorithmic executions that maximize leverage of the available liquidity in the market.

Advances in technology enable advanced aggregation services to provide high-performance execution management, accumulating liquidity across all execution paradigms such as central limit order book, bilateral trading, and exchange liquidity. Execution algorithms can be implemented, as well as venue-specific ones to maximize trade performance.

Aggregators can also be used as a hedging tool in a predefined, agreed and low latency environment with control and transparency to a trader.

End-to-end workflow and efficiency is optimized because aggregators automate cross-venue FX trading workflows — and analytics follow and improve executions.

From a trader’s desktop to front- and back-office processing (STP), aggregators are able to leverage a normalized ticket flow over post-trade notification systems and reconciliation options to ensure an accurate and timely processing of settlement obligations. 

How can aggregators help improve access to liquidity?

The growth of aggregation services has always been limited in emerging market FX. For the increasing number of financial institutions trading G10 and EM, aggregation did not help them to trade in markets dominated by exchange-based trading and others where brokers still dominate.

As EM evolves, it becomes more transparent and increasingly electronic.

With the growth of EM FX platforms, aggregators are now able to connect to this liquidity. In addition, some aggregation providers, like the Refinitiv FX Aggregator (i.e. product available in 2021), have connected with previously inaccessible markets, like MOEX in Russia and B3 in Brazil, to provide increased transparency and enable institutions to trade.

By aggregating pricing from exchanges in Russia and Brazil, Refinitiv is able to support tighter pricing and better liquidity, increasingly important at times of market stress when markets can become illiquid.

MOEX and B3 aggregation provides access to new pools of liquidity from local liquidity providers.

Market-leading liquidity

With advances in technology, modern aggregation services enable efficient execution management, providing trading firms with a single point of access to a range of different venues that support multiple different trading styles.

The challenge will always be liquidity and currency coverage. However, those connecting to OTC venues and exchanges, will be able to provide market-leading liquidity in a single normalized order book.

As technology becomes cheaper, maintenance costs are reduced due to full-managed hosting services (private or public Cloud), and communication improves, modern aggregation services become a necessity to all participants in the FX market.

FX Trading Platforms: Solutions to help you carry out your end-to-end workflows for trading forex


Refinitiv is now on Telegram! Receive daily updates of critical and timely market analysis to your mobile. Subscribe to t.me/Refinitiv

Subscribe to the Refinitiv Perspectives Weekly Newsletter