Farewell the FX Tape
Posted by Colin Lambert. Last updated: February 8, 2021
To the surprise of some, Euronext has abandoned one of pet projects of FastMatchFX, the FX Tape
At face value it seems a strange decision to end what has become known as the Euronext FX Tape – the service was terminated on December 31 – after all, it had spent the last six months hitting new highs in terms of the volume of trades it was reporting. The reality is, however, that the pace of growth probably did not meet the ambitions of the project. Yes, with the exception of January and May last year it was comfortably above the $100 billion per day mark, but exactly how much value does this provide in today’s spot FX market, where average daily volume often hits the $2 trillion per day mark?
The simple fact of the matter is that the service was becoming increasingly irrelevant, especially with so many other firms offering market data based upon much larger trade volumes. The competitive landscape simply became too much for what was, for the FX industry anyway, a novel idea. Throw in that the Tape relied heavily upon data from potentially competitive liquidity pools and you have the recipe for stagnation.
Sources in the industry tell The Full FX that it was, as one put it, “a good idea that has run its course and been supplanted by a newer, better, more accessible model or models”.
Another source suggests the problem was the Tape had too narrow a view of the FX world, its data coming from a relatively limited number of sources – this made it “a product for a different market structure, one that was not going to come to FX”.
So a mini-era of sorts comes to an end and what was the first real attempt to bring FX market data into the public domain has ended in closure. This should not mean, however, that it was a bad idea – far from it. It could be argued that the Tape helped accelerate the wider consciousness around market data and was a valid attempt to bring transparency to the market.
The problem for any FX Tape remains, however, that most major market participants do not want the transparency of business it brings – the buy side doesn’t need everyone to know someone has executed a large ticket and the sell side firm doesn’t need everyone knowing that someone may still be holding onto a large position.
So, in short, thanks Tape, you had a good go, but in the end there was neither the sustained demand, nor need, for such a service. Transparency is a good word in the current environment, but when it comes to OTC markets there is a nuance in that people are willing to accept more transparency around their actions and conduct, they are very much less inclined to have everyone gain an insight into their actual trading.