Best venue for spot – Euronext FX

With a new subsidiary in Singapore facilitating non-deliverable forwards trading and the addition of disclosed liquidity pools, Euronext FX has significantly ramped up its FX offering

FX electronic trading venues fared particularly well during the turmoil that rocked FX markets in early 2020. They overcame the widely held view that, in times of market upheaval, market participants would ditch electronic platforms and seek reassurance from their trusted counterparties via voice.

The Covid‑19 pandemic put paid to that debate. Not only did market participants not abandon electronic venues when markets became choppy, but they actually flocked to these very venues in search of liquidity.

“That debate, frankly, was put to bed in the course of what we saw in March 2020,” says Kevin Wolf, chief executive at Euronext FX.

Indeed, as many parts of the world were heading into lockdowns and volatility in the markets spiked in the face of unprecedented circumstances, Euronext FX saw volumes on its platform skyrocket nearly fourfold. In March 2020, spot volumes topped $55 billion at their peak, compared with a daily average of about $20 billion during normal times.

Anecdotally, the highest trading volumes were reached on the same day the venue decided to temporarily close its New York office and transitioned its staff to a remote working environment.

“The market clearly voted for us,” says Wolf. “It’s not only an important lesson for us but for the entire market as a whole as to how people want to trade when things get exceptionally volatile and highly extreme.

“This shows that the market has confidence in the customised anonymous liquidity pools that electronic communication networks (ECNs) have to offer.”

Anonymous liquidity has indeed been the hallmark of Euronext FX since its inception in 2012. Then known as FastMatch, the venue also primarily catered to a New York-based clientele. 

Things have changed significantly since then. In recent years, the firm has broadened its FX offering to include new jurisdictions, new instruments and new trading types.

“Disclosed relationship trading is now a prominent feature for clients wishing to take advantage of their existing connection with the ECN. The venue has also extended its offering to the rapidly growing non-deliverable forwards market through its Monetary Authority of Singapore-registered subsidiary, Euronext Markets Singapore Pte Ltd. Perhaps more significantly, Euronext ventured full throttle into the Asian market by setting up a spot-matching engine in Singapore, the first venue to do so,” says Wolf.

“The growth of electronic FX in Singapore is absolutely clear,” he says. “As a very efficient operator, we decided to take advantage of that growth and launch a matching engine to benefit from the ecosystem around us.

“Our peers haven’t made a similar move, so we are really leading the charge, which is really exciting for us,” he continues. “The ecosystem is growing much quicker than we would have thought, but it’s still early days. We’re highly confident that, over the next few years, our assumptions about the market in Singapore will hold.”

Launched in late 2019, the matching engine in Singapore is now the fourth for the ECN – after New York, London and Tokyo – and includes full liquidity management coverage, compliance and around-the-clock support through its office in the city-state. Following the launch, volumes traded in the Asia‑Pacific region began to swell, and an inflow of new Singapore-based clients started to trade with Euronext FX in the country, as well as in the venue’s other trading centres.

More recently, Euronext FX was approached by Refinitiv to provide liquidity through its new liquidity aggregator. As part of Refinitiv’s open culture and as a provider of best-in-class FX workflow solutions, including liquidity, Refinitiv enables selective third-party FX providers on its FX aggregator offering, ensuring the best service to Refinitiv customers. The continuous fragmentation of the FX market aligned to the market position of Euronext makes this a natural partnership to ensure best-in-class liquidity to the FX community.

Euronext FX also reinforced the transparency of its data offering with a product that combines executed volume trade data from CLS alongside trading data from its ECN. 

“We are big proponents of greater transparency,” points out Wolf. “We already provide a lot of data to our clients, such as providing tags to liquidity consumers for accepted trades and trades that are rejected by liquidity providers. We believe that transparency leads to better trading, which in turn leads to more trading.” 

Euronext FX was voted Best venue for spot at the 2021 FX Markets e-FX Awards.

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