In a new report by Boston-based financial research and consulting firm Celent, it is estimated that the FX market could grow from close to US$3 trillion to US$4 trillion of daily turnover by 2009–2010, with 75% of the interdealer spot market volume and 50% of the dealer-to-client volume traded electronically.
The report, entitled “Electronic Platforms in Foreign Exchange Trading”, also finds that algorithmic trading in the interdealer market now represents between 10% and 25% of the volume executed on Reuters and 20% of the volume on EBS.
In foreign exchange, “e-trading platforms could soon play an important role as consolidation and expansion continue across asset classes,” says the firm.
Changes are being driven by the buy-side. “The importance of new market participants on the buy-side and their ability to improve and generate liquidity is blowing the winds of change in FX markets,” comments Celent. The question, it seems, is not whether the FX market will adopt an exchange model, but when.