A More Electronic FX Market? Maybe

A recurring theme of the FX industry for many years has been the growth of electronic trading, however while there may be pockets of growth in certain products, in the big picture the reality is inertia if one looks at the data from the Bank for International Settlements’ Triennial Survey.

The survey was released at the end of September, and in the latest BIS Quarterly Review analysts take a deeper dive into aspect of the data, including execution methods, highlighting that in spite of continued innovation in the FX industry, at a high level across products, the needle is not moving – at least in terms of e-ratios.

Unfortunately, the latest report does not offer detailed percentages of execution channels used by different products, however across all products the e-ratio stood at 59% of global turnover – unchanged from the 2022 survey. Within this, the e-ratio for spot transactions, while still high, actually dropped a little, by around 1.5% to 71%. Encouragingly for those pushing for greater e-trading in FX swaps, the ratio here did rise, by around 3.5% to 56%, but outright forwards saw lower e-ratios, at 56% from around 63% in 2022. It was a similar picture in FX options, where the e-ratio fell from around 29.5% to around 27%.

While the ratios may have remained steady, with swings and roundabouts within the product sets, it needs to be noted that the share is of a much bigger pie, given how FX volumes surged in April. Notional values soared between BIS surveys, average daily e-volumes in spot rose to $2.1 trillion from just over $1.5 trillion, while in outrights it went from $728 billion to over $1 trillion. In FX swaps, notional e-volumes were over $2.2 trillion per day, up from just under $2 trillion in 2002, while in FX options it rose to $46 billion from $36 billion.

A key theme of the execution data is something noted in these pages previously – more trades are being put into competition, both in the voice and electronic world. The share of Voice Direct trading in all FX products fell by three points to 25%, Electronic Direct also saw the same drop off, albeit to 33%. Voice Indirect, meanwhile, rose one point to 13%, while Electronic Indirect rose three points to 26%.

The drop in e-direct trading was exclusively in single-dealer platforms, which held a 16% share of all volume. Reinforcing the sense that trades are in competition is how the ‘Other” channel in e-direct, typically aggregation streams, was unchanged at a 17% share. Disclosed, indirect, venues saw their share rise by two points to 16%, while anonymous venues also rose by one point to 10%. A caveat to the latter datapoint is that this share is historically low, for example in the 2019 survey it stood at 21%.

One factor influencing the trend, or lack of it, is increased internalisation rates, especially in Asia. Internalisation is not a new phenomenon in the major centres of London and New York, and this is reflected in BIS data which shows it rose fractionally from 2022, by around 1% to around 85%. While this is up from 2019’s 78%, the pace of growth is nothing compared to that in Hong Kong and Singapore, where internalisation rates – again across all products – rose to 80% in 2025 from around 73% in 2022. More notable, in the 2019 survey, internalisation rates in the two main Asian centres was just 55%.

Overall, the extra data released by the BIS suggests that counterparties seem comfortable with their existing execution channels. If they do more business, those channels see it, but while the revenues for providers of e-trading are rising in this scenario – and that is the important number of course – it serves to highlight that their performance remains very correlated with overall activity. Not only are firms struggling to shift participants from their existing providers, unlike maybe a decade or less ago, they are now challenged when it comes to getting these participants off voice.

To a degree this is likely the result of increased volatility – recent history shows that when markets get very busy people still like to pick up the phone – but the data could also be seen in a positive light for that very fact. After all, if busy markets push more people to the phone, and the e-trading channels maintained their share, opportunity surely knocks when things get quieter (or at least the market becomes inured to the vacillations of the US administration!)