Buy Side Looks to Bring FX Into the Multi-Asset Fold – Survey
The long-standing separation between FX and other asset classes in buy-side trading technology is coming under pressure, as firms look for a consolidated view of risk and more efficient cross-asset workflows.
Research from Acuiti, commissioned by Trading Technologies (TT), found that there is growing interest among hedge funds, proprietary trading firms and asset managers in bringing FX onto the same order and execution management infrastructure as they use for listed derivatives.
Unusually, costs are not the driver, instead, the majority of respondents said that gaining a unified, real-time view of risk is one of the leading benefits of consolidation. Improved execution quality was cited by 52%, while 46% pointed to the potential for expanded algorithmic capabilities.
The study, based on a survey of 65 buy-side firms, found 69% currently operate separate O/EMS platforms for FX and listed derivatives, reflecting both the legacy of siloed trading operations and the particular structure of the FX market, where bilateral relationships, multiple liquidity pools and OTC execution have historically encouraged the development of specialist technology stacks.
That separation is increasingly being questioned as firms centralise execution, build cross-asset trading desks and focus on operational efficiency. Bringing FX and listed derivatives together could allow firms to see positions and exposures across asset classes more quickly, while applying more consistent order controls and routing logic, the survey found.
There could also be implications for FX volumes. More than a quarter of respondents – 28% – said unifying FX with the OMS or EMS used for other asset classes would make them more likely to trade FX.
However, the distinctive characteristics that have kept FX technology separate in the first place remain an obstacle to consolidation.
Almost half of respondents identified migration risk as the biggest factor that could prevent them moving to a unified workflow. For technology providers, that creates a challenge: offering the benefits of multi-asset infrastructure without losing the specialist functionality, connectivity and controls required in FX.
Tomo Tokuyama, EVP and managing director, FX at TT, said consolidation needed to account for the individual trading and risk-management requirements of different markets.
“It’s vital that any project to unify an EMS and/or OMS for multiple asset classes addresses the many trading and risk workflow nuances of each asset class,” he said.
Ross Lancaster, head of research at Acuiti, said buy-side firms were increasingly reassessing their FX technology strategies, particularly where they also trade listed derivatives.
The results point to an interesting shift in the technology debate. FX’s fragmented market structure means dedicated infrastructure is unlikely to disappear just because users want a smaller technology footprint. Instead, the attraction of consolidation appears to be about whether firms can preserve specialist FX capabilities while gaining a comprehensive cross-asset view of execution and risk.
