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Screenshot of a breaking news alert e-mail from Q2 2017
For FX companies which serve a retail audience, the Swiss National Bank’s decision to remove the 1.20 peg on the EURCHF pair has created an effect which has ranged from very expensive to, in some cases, terminal.
Things for institutional firms are somewhat different. FastMatch, which matches buy and sell orders for banks, electronic trading companies and asset managers, experienced something of a spike, as the sudden movement in the Swiss franc resulted in the company recording its highest ever volume achieved in one day since the establishment of the company three years ago.
To put this into perspective, FastMatch exceeded its daily average volume for December 2014 by 200% in one day, having handled $24.3 billion in buy and sell orders in just one day.
London-based interdealer broker ICAP PLC also experienced a dramatic upturn in volume that day on its EBS currency-trading platform, which, according to a report by the Wall Street Journal, was nearly triple the recent daily average. The report, published yesterday, stated that the platform handled some $300 billion worth of trades.
One of the major distinctions is in the method by which risk is handled, with interdealer platforms such as ICAP not exposing themselves to much market risk, instead acting as an intermediary between bank and asset-management clients, earning fees as they match orders. For these businesses, profitability is closely linked to trading volume.
In the case of FastMatch’s commercial history which extends back to 2012, the company began its operations with a substantial reliance on retail FX flow from FXCM, however the firm has gradually expanded into other areas, making it less dependent on FXCM’s order flow.
The Wall Street Journal reported Friday FXCM is examining fundraising options to pay off the $300 million emergency loan which it took from Leucadia last week following its exposure to $225 million of negative equity, such as potentially selling noncore assets including its roughly 32% stake in FastMatch.
Dmitri Galinov, CEO of FastMatch has stated that his firm, which is located inside FXCM’s offices, is prepared to separate its trading entity from FXCM and is launching new services that connect asset managers’ orders with each other and with banks. One service is a potential challenger to the so-called “fix,” the long-standing currencies-pricing benchmark that is measured from trades executed around 4 p.m. in London each weekday.