Why Single-bank Systems Are Losing Ground

As the operator of FX Grid, a global inter-institutional connectivity and trading network, linking market making banks to FX market participants, we are getting good visibility in how other systems are performing. During the hectic days in May that put strains on everybody’s systems, we know for instance who had outages. (Integral did fine by the way. Read more in our press release and in an earlier blog post.) Single-bank systems were among the ones that suffered the most severe outages. I see this as a clear indicator that their decline is ongoing, despite some marketing hype.

Greenwich Associates already reported in April 2008 that “single-bank systems are failing to keep pace with the growth of multi-dealer platforms.” (E-Forex Comes of Age, Greenwich Associates, e-Forex Magazine, April 2008). In analyzing the results of its 2010 FX survey, Euromoney magazine made several observations that substantiate this claim. Euromoney writes: “The top three banks in the survey accounted for 40.44% of the total market in 2010, compared to 45.99% in 2009.”While Euromoney doesn’t say to where the market shifted, the fact that it continues to move away from the largest financial institutions suggests that single-bank systems are still losing market share. In my opinion, multi-dealer systems have clear advantages and the market seems to agree. Here are the four key arguments that proof my point. Continue reading Why Single-bank Systems Are Losing Ground