Our monthly FX insights

Hello from FX Markets,

This month, the FX industry has undergone significant changes, with three key trends: tier-one dealers offering internal liquidity interaction for passive orders, the rise of AI-assisted hedging tools for corporate treasuries, and the growing importance of futures exchanges as traditional spot markets decline. These shifts are transforming FX trading and risk management practices. Let's get to it.

Keys to the kingdom

As clients increasingly shift to passive order types, some tier-one FX dealers are providing a way for them to interact with their internal liquidity. This not only enables clients to earn spread instead of crossing, but it also gives banks the knowledge that there is a pool of passive orders ready to be used to offset flows from their wider client or algo franchises, meaning they have to make far fewer forays into the interdealer market.

AI-assisted FX hedging

Over the past few years, treasury teams at many large companies have?begun to experiment with algorithms designed to reduce the manual labour involved in some of their more complex, time-consuming tasks. Now, a new range of machine learning-based tools are aiming to help corporate clients adjust their hedging ratios and assist with hedging decisions.

The futures primary market?

Trading of FX spot on the primary venues of EBS Market and Refinitiv Matching – typically key inputs into pricing models – has fallen away. So much so that some believe the technical role these markets play has diminished. However, with FX futures exchanges seeing increased client and bank activity, liquidity providers may have to adjust how much weighting they apply to these markets within their pricing engines.

Upcoming dates for your diary

e-FX Forum, London, July 10 2024

Join us at e-FX Forum, a half-day event hosted by FX Markets, where industry experts will delve into the effects of the latest regulations and technological advancements. Connect with thought leaders, engage in discussions about challenges, and collaborate with peers to find solutions, all while staying informed about the shifts in the FX markets and their future trajectories. Explore the agenda and register now.

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