Markets Committee analyses changes in electronic markets
19 September 2018 London
Image: Shutterstock
Trading in foreign exchange and other fast-paced electronic markets is increasingly spread across a range of platforms, according to a new Markets Committee report.
The report, ‘Monitoring of fast-paced electronic markets’, analysed major developments in the evolution of market structure and their implications for central banks.
It found that electronic markets were increasingly spread across platforms, with non-bank intermediaries, most notably principal trading firms, gaining a stronger foothold.
It also found access to data and data-centric technologies increasingly defines competitive and market structure changes.
Jacqueline Loh, deputy managing director at Monetary Authority of Singapore, and chair of the Markets Committee, said: "Central banks have made significant advances in their monitoring of fast-paced markets, and will continue to adapt their approaches to market monitoring as necessary to fulfil their mandates.”
The report, prepared by a study group led by Imène Rahmouni-Rousseau of the Bank of France and Rohan Churm of the Bank of England also found trading is increasingly fragmented across a range of new venues, while the frequency of activity and speed of information flows have accelerated significantly, especially in foreign exchange markets.
Liquidity provision has become more concentrated among the largest banks, the report found, as smaller players resort to an agency model of market-making or exit the business altogether.
At the same time, a new set of non-bank intermediaries, most notably principal trading firms, have strengthened their positions, while greater electronification has led to the commoditisation of large quantities of high-frequency data.
The report points to an overall trend among central banks towards greater usage of high-frequency, transaction-level data.
“Monitoring market conditions in near time using such data can support monetary policy implementation and foreign exchange reserves management”, it said.
“Over the long term, such monitoring can serve financial stability purposes, for example, by allowing a better understanding of structural trends or aiding the analysis of specific events such as recent ‘flash crashes’.”
The report, ‘Monitoring of fast-paced electronic markets’, analysed major developments in the evolution of market structure and their implications for central banks.
It found that electronic markets were increasingly spread across platforms, with non-bank intermediaries, most notably principal trading firms, gaining a stronger foothold.
It also found access to data and data-centric technologies increasingly defines competitive and market structure changes.
Jacqueline Loh, deputy managing director at Monetary Authority of Singapore, and chair of the Markets Committee, said: "Central banks have made significant advances in their monitoring of fast-paced markets, and will continue to adapt their approaches to market monitoring as necessary to fulfil their mandates.”
The report, prepared by a study group led by Imène Rahmouni-Rousseau of the Bank of France and Rohan Churm of the Bank of England also found trading is increasingly fragmented across a range of new venues, while the frequency of activity and speed of information flows have accelerated significantly, especially in foreign exchange markets.
Liquidity provision has become more concentrated among the largest banks, the report found, as smaller players resort to an agency model of market-making or exit the business altogether.
At the same time, a new set of non-bank intermediaries, most notably principal trading firms, have strengthened their positions, while greater electronification has led to the commoditisation of large quantities of high-frequency data.
The report points to an overall trend among central banks towards greater usage of high-frequency, transaction-level data.
“Monitoring market conditions in near time using such data can support monetary policy implementation and foreign exchange reserves management”, it said.
“Over the long term, such monitoring can serve financial stability purposes, for example, by allowing a better understanding of structural trends or aiding the analysis of specific events such as recent ‘flash crashes’.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
