TradeTech FX: “Banks need to wake up to increased futures client demand and volumes”

The futures market has a bright future if banks wake up, concludes a buy-side head of trading.

Futures markets are growing both in terms of client demand and volumes, but banks remain slow to respond, a buy-side head of trading has concluded.

Speaking at a TradeTech FX panel, head of trading at Fulcrum Asset Management, Patrick Forde, said they were pushing banks to engage with the liquidity.

“We need more banks to wake up to the fact that volumes are increasing, that there’s client demand,” said Forde.

“It’s a limited number of banks that offer it. Sometimes it’s a risk issue that a future sits in one risk system and spot FX sits in another one. We need to move in-between, it’s the same risk. We’re getting there and banks are slowly connecting the dots. If they’re restricted from moving inbetween they’re just missing out on the liquidity. We’re pushing banks to engage.”

All participants speaking on the panel agreed that the futures market had a bright future, with volumes and participation growing. This they attributed to increased education, the market evolving away from simply being restricted to an exchange limit order book and to changes to the minimum block size.

“We are trading more and more futures. It’s more the merrier. The advantage of an exchange is there is varied participation. I can make or take prices,” added Putter.

Despite this growth, futures only represent a small portion of the foreign exchange markets and panellists attributed this to banks and technology deficiencies.

“Every execution desk wants things they can’t have due to budget constraints. The FX market is fragmented and a healthy marketplace is as many players as possible,” said Marc Putter, head of trading at systematic investment manager, Transtrend. “Many asset managers have systems that are set up to trade spot FX and forwards. If you add futures to the mix, it doesn’t work. The challenge for us is the OTC space. How do we grab that liquidity and participate in that market?”