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Liquidity, Regulation and the FX Global Code

15 Jan 2021, 04:20

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As 2020 drew to a close, Richard Elston met with FX Markets Magazine to discuss some of the pressing themes that stand to dominate in currency markets in the wake of a frantic and unparalleled year. Hopes are high that a degree of normality will be able to return in the New Year and despite the upheaval, the market certainly hasn’t stood still in terms of its ability to innovate.

With CMC Markets having been accepted as a signatory to the Global FX Code, the fact non-banks are able to participate in this protocol stands to enhance overall market quality, whilst also providing a clear benchmark for the buy-side when they come to undertake their own due diligence on counterparties. The emergence of a new wave of liquidity providers is also under the microscope, along with a clear message that this is no easy function to achieve, and instead requires a combination of capital, technology and established institutional relationships for successful delivery.

The idea that the regulatory reporting burden will increase – but simultaneously show some evidence of converging to form a common standard across regulatory bodies - is also addressed. Whilst CMC provides comprehensive, configurable reporting tools to its institutional clients, a degree of uniformity here would make it significantly easier to ensure consistent compliance with the necessary requirements. One common theme however is the role that all these innovations can collectively play in pushing towards lower latency trading. With that in mind, it seems almost certain that the next round of innovation will be as much about quality as it is quantity. 

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