Buy-side FX traders are increasingly focused on achieving best execution, with pricing and quality of coverage emerging as the top attributes when evaluating their FX dealers.
Based on interviews with buy-side FX traders globally, a recent Coalition Greenwich study found that over 40% of respondents cited uncompetitive pricing as the primary reason to reduce their trade flow to a dealer, while more than 20% highlighted the importance of quality of sales and relationship management.
“The buy side is becoming increasingly sophisticated in their approach to FX trading, and dealers must adapt to meet their evolving needs,” said Stephen Bruel, Senior Analyst on the Market Structure & Technology team at Coalition Greenwich.
“Pricing and quality of coverage are now the key drivers of a dealer’s success, and those who fail to deliver on these fronts risk losing business to their competitors.”
The Coalition Greenwich study also found that multidealer platforms (MDPs) are increasingly popular among buy-side traders, with 34% of respondents expecting to increase their use of MDPs in the coming year.
Ease of use and workflow integration were cited as key benefits of MDPs, with 48% of respondents highlighting the importance of best execution and pricing.
“MDPs offer a range of benefits, including ease of use, workflow integration and best execution,” said Bruel.
“They are an attractive option for buy-side traders who want to optimize their trading and achieve best execution.”
The study also found that single-dealer platforms (SDPs) will continue to play a role in the FX trading ecosystem, particularly for complex trades and structures. However, MDPs are likely to remain the preferred choice for routine trades and spot execution.
Why the Buy Side Chooses their FX Dealers and Trading Venues examines perspectives and perceptions of institutional FX traders with a focus on their dealer and trading venue relationships.
