Introduction

The appetite amongst sell-side and buy-side firms alike for electronic trading (or “e-trading”) continues to increase unabated. The Foreign Exchange (FX) space typifies theindustry’s fervour to provide electronic execution, with a third of FX transactions conducted currently being conducted electronically.

Key Findings

• Team structure – A majority of respondents opined that a dedicated team that exclusively supports FX e-trading infrastructure would be preferable, but this is not current practice across the banks in the research sample. 
• Budget and investment – The budgets directed to this area have increased significantly this year or have remained flat after considerable investment last year. The responses from the interviewed banks show that e-trading in the FX space is a fairly recent phenomenon. 
• Headcount –The banks that have the greatest numbers dedicated to support IT have expanded their FX e-trading teams only recently, and therefore, are not expecting extensive increases to support teams any time soon. 
• Regional approach – Although uniform global standards are currently in place at just three of the banks, at two banks, where different systems are being used in different geographical regions due to mergers and acquisitions, efforts are underway to align the systems globally. 
• Latency management – Whilst each of the responding banks expressed that having a dedicated team for this purpose would be ideal, only one bank has a dedicated latency management team for FX e-trading. At each of the remaining banks, latency is monitored, rather than managed, and is done so by a non-specialist team as part of wider responsibilities. 
• Organisational model – A common theme across the majority of banks is that the degree of agility of the e-FX team in responding to business needs was dependent on how close it is to the business in terms of organisational structure. Thus, the closer the team are to the business, the more effective they feel themselves to be. 

Conclusion

Electronic trading of foreign exchange is a business gaining a great deal of traction across the industry. Banks are either developing the required infrastructure to enter the market or are upgrading existing IT infrastructure to further establish and improve their market positions. With all of the interviewed banks having attained a presence in this space, it is anticipated that FX will continue to become increasingly competitive. In terms of e–trading of FX, the focus of effort and budget will be on latency reduction in the medium run.

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