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Supporting FX markets during turbulent times

Rohan Bin Shams, ACIM
Rohan Bin Shams, ACIM
Marketing Director, Strategy & Planning Team, Trading Division, Refinitiv

COVID-19 has caused great disruption, not just to FX markets, but also to those who work within that environment and the way that they operate. How has Refinitiv, a market-leading provider of foreign exchange trading solutions, helped sustain the FX markets?

  1. COVID-19 has seen the normal working practices of the FX markets heavily disrupted, with many people conducting business from their homes. Refinitiv has ensured a successful transition to this virtual office environment (VOE) to support its clients and the wider FX trading infrastructure.
  2. Crucial to the success of this transition has been how Refinitiv has enabled its clients to have continued access to the trading platforms providing the liquidity needed across currency pairs and geographical regions.
  3. To further support the business continuity of its network of clients, Refinitiv has provided access to the trends, market insights and tools that will support compliance and best practice, and ensure the FX market ecosystem continues to operate smoothly despite the disruption.

Although the COVID-19 pandemic has dominated the news agenda in recent months, there have been other events that have affected the geopolitical landscape.

The simmering trade tensions between the major global economies, the Australian bushfires, and the crisis in the oil market have all added to market jitters across the world.

Volatile FX markets

For FX markets, the uncertainty has led to volatility that has not been seen since the vote on Brexit.

However this time round, volatility was not limited to market movements across G10 and Emerging Markets countries. Volatility also extended to the physical act of work — where we work from, and how we work — as many in the trading community found themselves working outside of their usual office environments.

Not within living memory have continuity planning measures been put in place on this scale across the FX trading buy-side and sell-side.

Supporting FX markets

At Refinitiv, we have ensured that we continue to support the market appropriately, no matter what the circumstances are. Across the world, our colleagues have been able to resolve client challenges within hours of them arising. And have done so while sitting on sofas, kitchen chairs, or deckchairs in their homes.

Access to liquidity

So far this year, the average daily volume across Refinitiv’s FX trading platform is around US$460bn, which is among the highest volumes facilitated by a single FX trading service worldwide.

FXall is the complete end-to-end solution for your FX trades

Considering the disruptive circumstances in which these volumes are being reached – and how our clients were able to find continued access to liquidity across the currency pairs and geographical regions needed — is testament to how effectively our partners were able to transition to virtual work environments.

Refinitiv’s network of clients, including almost every single major institutional FX trading firm (across the buy-side and sell-side), is connected to more than 2,300 institutional clients and nearly 200 liquidity providers through Refinitiv FXall.

FXall’s advanced workflow solutions and execution tools have been critical in helping the buy-side safely cope with much larger volumes from their remote or virtual work environments. FXall clients rely daily on a broad range of features, including:

  • Pre-trade order netting (including cross-currency netting and netting of same pair exposures that have different dealt currencies) to submit orders to the market for the most cost-effective execution possible.
  • Batch trading workflow and rules-based auto-execution, in order to automate all or portions of clients’ trading activity and increase operational efficiency.
  • Execution algorithms and other advanced order types that help users access liquidity in smarter ways, minimizing market impact as well as information leakage.
  • Sophisticated business intelligence to assess trading performance, identify improvement opportunities and enhance provider selection.
  • Regulatory reporting, audit trails and transaction history for robust risk management and compliance.

Similarly, via Refinitiv FX Matching, we are well established across more than 900 client sites and over 5,000 manual Refinitiv FX Trading users, making us the single largest ecosystem for FX transaction venues across the markets.

Business continuity support

Very early on during the disruption, we reached out to over 500 of our leading clients across the buy-side and sell-side. We wanted to understand how they are adapting to their virtual environments and the areas in which they might need help and support.

The insights gave us a fair representation of why the electronic trading venues that we provide are the essential cogs in keeping the FX global ecosystem up and running.

This was a test of our support, infrastructure and continuity services as well. For example, Refinitiv as a whole processed 176 billion updates on one day, when markets reached peak volatility in March. That is not just breaking a previous record, it’s obliterating it. The operational resilience and the way in which the entire industry is coping with this fast and sudden change is quite remarkable.

Market insights and compliance

With Refinitiv FXall Trade Performance Analytics, we have enhanced how buy-side clients can monitor market spreads, and build greater insights to help focus on transaction cost analysis (TCA) — an essential consideration during this disruption.

Access to liquidity and counterparties for our clients was an important consideration, but a further critical element of our strategy was to provide quick and easy access to the trends, market insights, and tools they required to ensure regulatory compliance.

The launch of Refinitiv Compliance Archive in partnership with Global Relay has helped ensure that we can provide archiving and compliance support for all ‘virtual engagements’ our clients undertake.

What lies ahead for FX trading?

Our vision and strategy for FX trading in 2023 is the cornerstone of gauging the progress made towards transforming the FX trading eco-system.

There are many releases on the horizon.

The introduction of APIs for Forwards Trading in Refinitiv FX Matching is based on the Spot Matching API that is already used by many FX participants. This new Forwards Matching API from Refinitiv will further support trading efficiencies and reductions to total cost of ownership (TCO) for Refinitiv clients.

In addition, with FXall Large Order Splitting, buy-side traders will soon be able to break up large orders into smaller child orders that can be executed using different execution methods, providing them with greater flexibility and control over their execution, while helping them minimize market impact and information leakage.

Meanwhile, by introducing liquidity aggregation via our Refinitiv FX Trading platform, and a faster binary feed for our Refinitiv FX Matching clients, we are ensuring that we will continue to be a market leader for many years to come.

FXall is the complete end-to-end solution for your FX trades

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