Electronic trading in foreign exchange continued to gain ground in a contracting market last year, overtaking the telephone as the primary channel for customer dealing, according to research by Greenwich Associates.
While total FX volumes declined six per cent from 2008 to 2009, e-trading volumes increased by seven per cent, suggesting that market participants continue to actively shift volumes to multi-bank and single dealer platforms from other channels.
The contraction in the markets, coupled with growth in online trading, pushed the share of total foreign exchange trading volume executed electronically to 58% in 2009 from 54% in 2008, notes Greenwich Associates.
Electronic trading systems now capture 53% of total foreign exchange trading volume in the Americas - up from 48% in 2007-2008 - and 61% in Europe - up from 59%.
The shift to electronic execution has been even more pronounced in Asia, says the consultancy. In Japan, e-trading increased to 63% of total FX volume in 2008-2009 from 42% in 2007-2008, driven by a huge increase in volume among retail aggregators. Across the rest of Asia, electronic platforms attracted half of total foreign exchange trading volume, up from 40% in 2007-2008.
Less than 30% of FX trading volume is now done by phone in the United States, and in non-Japan Asia that share has fallen to just 21%, says Greenwich Associates. Around the world, multi-bank electronic trading platforms captured about 40% of overall FX trading volume in 2008-2009 and single-bank platforms captured another 15%. In Asia, telephone transactions have even been surpassed by messaging systems on Bloomberg and Reuters, with these channels capturing 23% of overall volume.
Greenwich Associates consultant Frank Feenstra comments: "We fully expect this trend to continue as electronic trading platforms continue to attract new customers and market participants already experienced in electronic trading allocate increasing amounts of business through electronic systems."