e-Forex July 22

Electronification and Automation: Unlocking the full potential of Emerging Market FX trading
SPECIAL REPORT
“Eventually EM countries could benefit from central bank
digital currencies and workflows, but this will require
greater regulatory clarity and a high degree of jurisdictional
cooperation.”
Tod Van Name
The emerging market (EM)
FX industry has been boosted
significantly by the use and evolution
of electronic platforms. New
technology can reduce the complexity
and manual intervention that is
typically more prevalent in EMs.
Similarly such platforms can also help
with liquidity access and management
as well as operational risk.
Technology has also played a part in
the growth of the non-deliverable
forward (NDF) market and could still
be a factor in the digital assets and
crypto markets in EMs. What remains
to be seen is what comes next in
terms of digital workflow innovation
and automation in EM FX platforms,
particularly on the post-trade side,
and whether this will help to release
the full potential of EM FX trading.
MULTI-DEALER PLATFORMS
“For many EM countries, e-FX solutions
provide a convenient transition from
voice to electronic trading, and cover
a wide range of currencies and
instruments,” says Tod Van Name,
global head of foreign exchange
electronic trading at Bloomberg.
“Multi-dealer platforms like Bloomberg
provide access to all major and regional
liquidity providers for both onshore and
offshore markets.”
Multi-dealer platforms also provide
many enhancements that make trade
EM negotiation more efficient, says
Van Name. “This is through features
such as default fixing source and date
for NDF trades, curated calendars
for selecting automated settlement
dates, and algorithmic capabilities for
NDF trading that reduce or eliminate
the need for manual intervention.”
A further benefit of electronic trading
platforms is the way they help to
access FX liquidity in emerging
market currencies, says Van Name.
“In many cases the challenge with
supporting emerging markets is not
the technology, rather it is access to
local communities. Bloomberg has
established a network of liquidity
providers in more than 140 countries,
with a very strong presence in
onshore markets. This not only
provides access to liquidity, but also
better transparency for all market
participants.”
Electronic platforms can also help
to reduce the operational risks that
are potentially greater in EMs where
liquidity is thinner and volatility is
greater, says Van Name. “Emerging
markets are occasionally susceptible
to decreased liquidity and increased
volatility, and e-FX solutions provide
a clear, consistent method for market
participants to negotiate trades with
the same suite of solutions available
to developed markets, including realtime
deal capture, straight through
processing, and complete audit trails
that increase efficiency and reduce
risk.”
A further benefit of electronic trading platforms is the way they help to access FX liquidity
in emerging market currencies
Access to emerging markets has also
been increased by the electronic
trading of NDFs and the evolution
of the asset class. “In the past,
automating NDF trading was limited
by inconsistencies in fixing sources
and available liquidity,” says Van
Name.
30 JULY 2022 e-FOREX