Electronic Foreign Exchange: Booming Despite Crisis

In the midst of the global financial crisis, electronic foreign exchange (eFX) experienced a boom in 2008, with overall eFX trading volume surging 37% year-on-year, according to research by Greenwich Associates.

FX markets the world over have been lifted by historic levels of volatility and by the inflow of investors seeking liquid markets and ‘plain vanilla’ assets. But the research shows that the growth of eFX last year far outpaced the expansion of FX trading as a whole. In fact, the 37% growth rate in electronic trading (e-trading) was almost triple that of the 13% year-on-year increase in total FX trading volume. As a result, the proportion of global FX trading volume executed through electronic systems jumped to 53% in 2008 from 44% in 2007.

“The severity of the global banking crisis makes the continued strength of eFX and FX markets all the more impressive,” says Greenwich Associates consultant Peter D’Amario. “Despite a crisis of confidence that caused counterparties to stop trading with certain banks altogether and to reduce the trading lines they were willing to extend, the market managed to sustain its momentum and grow to new record levels.”

E-trading growth was strongest in Europe, where e-trading volume jumped 78% in the UK and 37% in continental Europe from 2007 to 2008. The share of total FX volume routed through e-trading systems climbed to 57% from 47% on the continent and to 58% from 41% in the UK. Growth in US e-trading volumes was only slightly more modest at almost 20%. Overall, the biggest increase in electronic trading volumes last year came from retail aggregators, whose total eFX volume grew 43% year-on-year. E-trading volume increased by 26% among corporate users and by 40% among financials.


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