It has been an interesting year for options traders. In January, 360T launched its UK-based multilateral trading facility (MTF), supporting FX options as well as swaps, non-deliverable swaps, forwards and non-deliverable forwards, while in October, OptAxe announced it had received Financial Conduct Authority (FCA) authorisation to operate an MTF for axe-driven FX options trading.
“With FX options transaction costs currently running 2.4 times higher than peer markets, the push toward more centralised, transparent trading platforms addresses a clear market need,” says Alvin Chopra, chief operating officer and co-founder of SpectrAxe. “The ability of these venues to enable direct participant interaction while automating workflows promises to significantly reduce both explicit and implicit trading costs.”
Numerous factors behind improved liquidity
There has been a significant improvement in market liquidity this year, as heightened volatility attracted more capital flows, says LMAX Exchange managing director Patrick Bartle. “Advances in trading technology also played a significant role in this increase, with traders taking advantage of faster execution, increased market access and greater efficiency in liquidity provision.”
In addition to more market makers, Tod Van Name, global head of FX electronic trading at Bloomberg, refers to an increase in the breadth of products, such as digital knock-in and knock-out.
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