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eFX 'Explainers' – FX Venues

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The electronification of FX trading has gathered pace over the past few years, where the majority of FX trades are now executed electronically. The eFX Explainers series gives deeper insights on how the electronic FX market operates focusing on the role of different venues in electronic FX trading.

Today, various types of interbank trading platforms operate in different segments of the FX market. These platforms can be broadly categorised as Primary Venues (holding ‘authority’ in most global, liquid FX Spot currencies), Secondary Venues (present in space not dominated by the Primary Venues), and Alternative Venues (such as Dark Pools, Exchanges and ‘Pair Trading’).

Overall, volumes traded on the Primary Venues have remained relatively stable, but the share of trading on other platform types such as Secondary Venues has been steadily increasing in recent years.

HSBC eFX Volume Distribution

HSBC eFX Volume Distribution

Venues present choice to participants who face multiple counterparties, offering various features such as multiple order types and liquidity pools. However liquidity mirage (the illusion of liquidity), increased market impact and potential pricing instability mean many buy-side firms prefer to trade on bank single-dealer platforms such as HSBC’s award-winning FX trading platform, Evolve. The HSBC eFX desk internalizes up to 90% of risk, resulting from client transactions, benefiting clients with competitive pricing and lower post-trade market impact.

HSBC has a strong presence on all major venues for FX trading, and can leverage a vast array of experience in FX markets to provide clients with unmatched liquidity and competitive pricing across the spectrum of FX products and currency pairs.

The eFX Explainers series produced by HSBC’s Global Markets eFX Quant Trading desk sheds light on the electronic FX market, helping to de-mystify the word of electronic FX trading. Download the PDFs below to find out more.

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