The FX Market: Protect, Survive, Thrive.

The three stages of response to ongoing regulatory change in the FX market include:

1. Protect

The first stage is PROTECT, wherein participants have knee jerk reactions to new rules and quickly focus resources to address the required workflow and behavioral changes required to be compliant with new regulation. We have seen the FX industry already establish trade reporting compliance, the next major threads for OTC participants will be the use of regulated execution venues and ultimately, mandated CCP clearing for many products — all a dramatic change from existing bilateral channels.

2. Survive

Once through protect, the SURVIVE stage is where participants quantify the cost of compliance in their amended business models, then mitigate these by exploring synergies and workflow optimization in order to remain viable. Solutions like flow netting and compression, the voluntary use of a suitably authorized CCP to gain capital efficiency, and moving to futurized products where the change in risk profile is acceptable are often employed.

3. Thrive

The final stage, THRIVE mode, is where participants have gained compliance, optimized their models, and start to pursue new strategies and opportunities that are available because of structural change in the market. This is very fertile ground for fresh entrants to the market with new products and services designed specifically to help their customers to thrive in the new landscape.

Our ambition at Nasdaq has always been to ensure that our FX offering is sufficiently broad to suit market participants at any stage of the aforementioned lifecycle, and indeed we often find ourselves helping our Members graduate into Thrive mode.

You can find out more about the Nasdaq FX offering at:

David Holcomb
David Holcombe

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.