FX Week, January 2014 - Global foreign exchange volumes could double by 2020 due to growth in emerging markets (EM) currencies in Asia and Russia, according to David Mercer, chief executive of trading platform LMAX Exchange, which has added ruble and offshore renminbi (CNH) to its list of traded currencies to benefit from the surge in volumes.
The multilateral trading facility is also set to expand into other FX instruments, such as swaps and non-deliverable forwards, in the near future. The platform currently has 65 currency pairs available for spot trading.
“Daily turnover of FX reached $5.3 trillion in 2013, a 35% increase from 2010, and is set to grow in 2014 and beyond. This growth will be driven by emerging markets in 2014, with Asia and Russia being two key markets,” says Mercer.
LMAX Exchange will have to compete for flows in the ruble with EBS and the Moscow Exchange, two of the biggest players in the currency, but Mercer says the huge growth potential means that there will be enough flows to go around.
“We’ve seen more than 50% of our client acquisitions coming from eastern Europe and Asia-Pacific regions, so there is interest in the ruble and there is interest in CNH. That said, like every other venue, the majority of flows are through the majors, but clients want an array of spot products and beyond that they will be looking for products that aren’t spot, whether they be non-deliverable forwards, swaps or futures,” he says.
LMAX Exchange, which does not publicly report volumes, has hit average daily volume highs of $10 billion, while the launch of LMAX Interbank last year has given Mercer encouragement for its ability to eventually compete with incumbent venues. Furthermore, the expansion into new FX products will be essential to be able to compete with demand from EM regions, he says.
“Down the line, we’re looking to expand that product range. In terms of geographic territories, we’ll be looking to expand our operational presence into the Asia-Pacific region in 2014, and when we do that it’ll be important we have as wide a range of assets and products offered as possible. We need to offer market access to our growing and diverse client base.”
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