Fragmentation - Not Just A Problem For Fixed Income

Interesting to hear that FX is facing similar challenges to those faced by Fixed Income.

On the Liquidity Panel at FX Week Europe yesterday the panellists agreed that one size doesn’t fit all.

Some FX traders want firm liquidity, some want tighter prices with last look, some want bank only liquidity, and some want bank and buy-side, some want specific liquidity providers for certain currencies only, some want OTC, some want exchange, some want a transparent market, some want dark pools, some want to clear post trade and some don’t, some want a liquidity provider that doesn’t immediately offload the risk, others don’t mind………..and the list goes on.

What does this mean? FRAGMENTATION

I don’t think FX will get to the same level of fragmentation that we have in Fixed Income and Derivatives markets. But FX participants will still have to connect to the trading venues and manage multiple system upgrades. This also means that liquidity providers need scalable and fast technology.