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In a speech to the TradeTech FX conference, Andrew Busch – who was named the Commodity Futures Trading Commission’s (CFTC) first chief market intelligence officer less than 12 months ago – said the CFTC was concerned about loss of liquidity in the FX market and specifically whether some of it actually exists.
A survey conducted by the organizers of the event among traders and heads of FX at US-based financial institutions found that half of respondents viewed finding alternative methods to source liquidity as a priority.
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Dan Marcus, ParFX |
Busch’s views have garnered some sympathy, with ParFX CEO Dan Marcus describing phantom liquidity as a hindrance to traders that not only portrays an inaccurate picture of market depth but also results in a lack of confidence across the board as efficient price discovery and execution is unachievable.
Some electronic communication networks – to look like they are offering a deeper market – will pretend to appear like a client to other networks and republish the depth, adds Nick Dyne, co-founder of Cash Netting Services (CNS).
“In this way, the actual depth is massively exaggerated,” he says.
