THETRADETECHFX DAILY
“ We tend to prefer execution without Last Look and with access to strong internal, non-recycled liquidity.”
Christian Beinert, foreign exchange trader at MEAG
“ I still enjoy utilising those execution methods in a world that is far more e-driven,” Baker says.“ It is good to still be able to pick up the phone should we need to and get colour on the trade as we are executing it.” Baker also notes shifts in the forwards and swaps market, particularly between collateralised and uncollateralised trades, while in FX spot he reports stable pricing from banks. His emphasis, like Beinert’ s, is on diversification and flexibility. On the sell-side, Baker notes the increased turnover on the FX sales desks.“ FX is a relationship business, so if this is not managed carefully, it could have an impact,” he explains.“ But the positive is that, despite this higher turnover, the change is well managed by the banks and those relationships remain intact.” However, while the banks continue to do a fantastic job, they cannot rest on their laurels, Baker warns.“ There is a lot of non-bank liquidity available and these providers are now trying to attract more buy-side business. It is a case of evaluating how we can best access that liquidity and is there a benefit for our clients if we do? If there is, then we need to look at it. If there isn’ t, then we continue as we are,” he concludes.
Traditional sell-side – a retreat under stress One of the clearest lessons from this period was the cautious stance taken by traditional sell-side institutions. Many banks reassessed their balance-sheet commitments and reined in risk-taking. For some clients, this retrenchment meant patchier access to consistent pricing, especially in less liquid pairs or away from core hours. Bartle argues that sell-side participants also became more selective during this period, with many re-examining their liquidity distribution or retrenching.“ This behaviour left many clients without a consistently reliable source of pricing, highlighting the vulnerabilities in periods of extreme stress,” he adds. Bartle adds that reports of liquidity mirages – quotes that are shown but disappear when a trader tries to interact with them, often due to aggressive lastlook practices – were accurate.“ The market protects against this by moving to transparent, firm-liquidity venues like a central limit order book,
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