Forex trades hastens through computer platforms

The allegations that foreign exchange traders have conspired in rigging a crucial currency benchmark has resulted in the top banking institutions in recent months to speed up the long decade-due onto the application of electronic platforms.

Electronic trading is basically compliant in nature, the head of trading at a top-ten global investment survey. Regulators in Asia, U.S. and Europe are all investigating the allegations that voice spot traders who develop prices and purchase and sell currencies over the phone, have shared information regarding client orders with rivals to the influence markets.

The probes so far sparked the suspension which placed on leaved the 22 forex traders prompting calls for stricter policies in the seemingly unregulated largest financial market in the world. The financial stability board, which is a group of global regulators is presently working on proposals for making changes in forex benchmarks, while politicians which include German government ministers are disputing currencies that are being traded on regulated exchanges.

Financial institutions are making moves toward exchanges as it would move further margins wherein the value of costly investments into their own trading platforms are being pushed away from outdated voice trading structures that are at the hub of the probes.

Within the decade, online trading and programmed algorithms are becoming more and more indispensable in forex trading. In the span of all products, electronic trading volume moved from single-digits in the early 2000s to more than 74 % last year.

Despite this, the spot market still kept within the elements of voice trading and approximately 35 % of volume in the global spot market directly changed their hands and traders who take the risk are still doing things over the phone according to settlement surveys by the Bank for International Settlements Data.

Bankers are all claiming that they are mostly driven primarily by client demand. However, the prominent rise of machine driven trading in the past decade has already took its toll on the power of top voice traders. Their ability in taking control and manipulating prices is presently diminishing.

Traders are bringing more and more orders on various electronic platforms akin in stock trading which will probably foster dominance in the market of among the largest operators.

Finally, a good number of traders feel that electronic trading will be restructuring reforms towards platforms of the largest players after a few years. This however should push down profitability. The absence of transparency around large orders are being executed by traders directly with their respective clients over the traditional assistance of banks in making huge profits in voice trading. Furthermore, if such orders are being broken down into much smaller pieces through an electronic platform then there is the possibility of a lesser scope of profiting.