Research Shows Global FX Trading Growth Trends Driven by Electronic Trading, Risk Concerns and Cost Control
CME Group released results from a new global study that reveals market participants' growing focus on electronic trading, risk management and cost control is driving the record growth in global foreign exchange (FX) markets. The Global FX Market Study, sponsored by CME Group and undertaken by ClientKnowledge, a leading wholesale financial services research and consulting firm, provides fresh insights into several trends that are reshaping the $3.2 trillion a day global FX market.

Download the Global FX Survey Market Report (PDF)
Download the FX Trends White Paper (PDF)

Key Findings:
While it is well established that traditional telephone and voice-based trading continues to give way to electronic trading, the study revealed the following:

• Traders expect electronic trading growth to gain momentum faster than previously anticipated. CME Group's Global FX Market Study predicted an average of more than 80 percent of all cash business will be excuted electronically in 2010 (banks 89 percent, traditional money managers 83 percent and non-traditional money managers 96 percent).
• Although latency is a hot topic with electronic traders, 72 percent of bank survey participants cited counterparty risk as their biggest concern, followed by settlement risk (64 percent), giving a clear advantage to the exchange-style centrally cleared model, which lessens both of these risks. Latency was of concern to only 19 percent of participants who responded to this question.

Traders of all categories also continue to focus on efficient execution. The study showed the following:

• 79 percent of active and 81 percent of real-money traders were concerned primarily with bid/offer spreads as they key component of their transaction costs.
• Market impact (price movement during trade execution that negatively impacts the market price) concerned 59 percent of active and 64 percent of less active traders (although the width and depth of the market and its effects on the spread are difficult to separate).
• Settlement costs(including exchange fees concerned 49 percent of active and 48 percent of less active trades, while, in line with the relatively low number of algorithmic traders, reported fills relative to benchmark prices concerned a mere 23 percent of active and 15 percent of real-money traders.

Downloadable Charts:

    Supplying E-Pricing     % Cash Business Traded Electronically   Transaction Cost Analysis

Quotes from Derek Sammann, Managing Director of CME Group FX Products on the Global FX Market Survey sponsored by CME Group
"This study confirms that electronic trading venues need to provide state-of-the-art execution and post-trade services. CME Group is well positioned to further expand its reach as a major player in this fast-growing market. Our execution platform is leading edge for multiple user types and our post-trade services capabilities, including clearing, directly address the requirements of traders, risk managers and regulators."

"The concerns about counterparty and settlement risk speak to the value that an exchange model brings to the FX market and the potential to play even a greater role in the market."

Research firm:
For the past 14 years ClientKnowledge has interviewed participants in the FX market to provide a global picture of emerging trends and the performance of FX providers. This allows us to provide actionable market data and advice to our clients. To find out how ClientKnowledge can help your business go to: www.clientknowledge.com.

Survey: the survey polled 933 market participants, including 333 banks, 333 money managers and 267 'non-traditional' money managers or 'leveraged' traders including hedge funds and Commodity Trading Advisors (CTAs). Participants were drawn from a global distribution. The research was conducted between June and August 2007.