We all like to use metaphors and analogies, although I’m led to believe they have no real place in journalism. Still, as I wrote only the other day, FX is a big enough pie for most people to get a decent meal.
I heard a new one at lunch on Monday: FX is like a cracked bath, where the taps are running but the water is leaking out. That, so my mucker claimed, should worry the major liquidity providers, because the leakage is going off to alternative platforms. My view is slightly different. Provided the taps keep running, the major liquidity providers will probably not be too concerned. The problem will only become apparent if the taps slow and liquidity starts to dry up at the market’s hubs and, depending on how far below the water line the leak is, at alternative venues. I’m not sure where that crack is, and so who is the most vulnerable, the established hubs or the new upstarts who thrive on the repackaging of liquidity.
Ultimately, whether or not FX is comparable to a cracked bath (You should know all about taking baths in FX – Ed.)