FX Trading Leaders’ Network: FX liquidity – a ‘hall of mirrors’

FX markets are undergoing rapid structural change as venue fragmentation, rising technology costs and shifting liquidity patterns reshape how firms trade and access risk. Against this backdrop, the inaugural FX Trading Leaders’ Network examined which developments are helping or hindering execution quality, where transparency is evolving and how market participants can best adapt to an increasingly complex FX ecosystem.

 

Key takeaways

• Participants at the FX Trading Leaders’ Network believed that FX liquidity fragmentation is beyond its peak.
• The cost of providing liquidity to every platform may not be in the interest of every liquidity provider, especially those with limited resources.
• Despite competition between the myriad platforms in the FX market, fees have not decreased.
• Escalating data and platform fees can favour large banks and create barriers for smaller or regional liquidity providers
• Buy-side firms may sometimes be unaware of the quality of the liquidity they are consuming.
• Sustainable liquidity increasingly depends on trusted, long-term relationships and data sharing rather than onboarding more venues or liquidity providers.
• Liquidity providers combining low-cost technology, transparent governance and strong analytics – plus agile non-banks and agency brokers – are best positioned to succeed.