Liquidity overtakes best execution as top concern for FX traders

JP Morgan’s third annual e-trading survey reveals that FX traders are most concerned about liquidity in the year ahead.

Liquidity concerns have taken over from best execution requirements as being the greatest concern for foreign exchange (FX) traders in 2019, according to JP Morgan.

The US investment bank’s third annual e-trading survey, which saw 200 of its largest institutional trader clients surveyed on market trends in 2019, revealed that a majority of 40% of FX respondents agreed that liquidity is the biggest daily challenge facing traders. 

In comparison, last year’s survey saw 29% of FX traders state that the availability of liquidity was the biggest daily challenge, with best execution requirements and precision of execution concerns topping the list for a majority of 37%.

The survey also found most traders believe that MiFID II, which came into force in Europe a year ago, has had a negative impact on the global liquidity landscape. A significant 73% of respondents said that the liquidity environment is either slightly, somewhat or significantly more challenging under the European regulation. 

When it comes to selecting a liquidity source, just under three-quarters of FX traders told JP Morgan that price consistency is the most important criteria when considering potential sources, with 63% identifying availability during volatile markets as another key requirement.

In terms of technology, JP Morgan’s survey revealed that FX traders are not convinced that blockchain will have a significant impact on the industry in the next 12 months, with just 9% agreeing the technology will shape the future of the trading. 

Artificial intelligence and machine learning technology, however, could have a much bigger impact this year, according to a large majority of 57% of FX traders. Mobile trading apps followed AI and machine learning capabilities, with 28% of FX traders stating they will shape the future of the industry.