Foreign Exchange: Keeping Pace in an Explosive Market
The FX market is by far the largest marketplace in the world.
With exponential growth year on year, an average daily trading volume
of $5 billion in 1977 has risen to an estimated $2.9 trillion for April
2007 (‘The FX Marketplace: Trends, Opportunities and Challenges’, GT
News) In the last three years alone, trading volumes have
increased more than 38 percent, and this is a trend that looks set to
continue.
Recent transformations in the market have re-vamped FX
trading practices, presenting banks with new challenges and
opportunities. FX is now an asset class in its own right. Hedge
funds are increasingly interested in FX as an alternative to fixed
income, and equity and hedge fund activity has been a driving force for
innovation in the market. Significant rises in electronic and
algorithmic trading have led to the disappearance of traditional
wholesale traders.
To stay competitive in this
environment, banks need to find a way to reduce transaction
costs. Real-time, high-capacity solutions are becoming essential
for processing ever-increasing trading volumes. This, together
with an increased focus on electronic trading and the quest for faster
execution of secured settlements, is calling for banks to re-examine
their internal systems.
