The last decade has seen a significant uptick in electronic trading across a broad range of asset classes. This growth coincides primarily with the onset of three dynamics: the quest for increasingly elusive profitability; technology advancements; and snowballing regulations that hurled tougher standards on transparency, execution and reporting.
There are other factors that are also influencing the move to electronic trading, such as the increasing need for banks to service clients with speed and accuracy, and to keep pace with clients’ increasing demands for bespoke solutions, which overwhelmingly includes trading in over-the-counter (OTC) derivatives. In fact, the anticipated “electronification” growth rate of the global OTC derivatives market over the next few years is exponential.
This may be considered quite remarkable given there was a time when most traders would have thought the electronic trading of OTC derivatives would be impossible. And the move to electronic trading of OTC derivatives has taken hold faster than most might have guessed. Banks of all sizes are beginning to make the move, with one clear incentive being the real potential to capture a dramatic increase in trading volumes and revenues.