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FX trade execution: complex and highly fragmented

Author

Listed:
  • Andreas Schrimpf
  • Vladyslav Sushko

Abstract

The 2019 Triennial Survey shows that trade execution has undergone rapid change, with more diverse participants, new technologies and increasing complexity. Electronification advanced the fastest in dealer-to-customer trading. Dealers and customers navigated a highly fragmented market by leveraging technology to trade across electronic venues. Aspects of FX intermediation tilted more towards non-banks as new market-makers, albeit brokered by top dealers. Bank dealers continued to attract large flows to their own proprietary liquidity pools. Consequently, even though the market grew bigger as a whole, the share of trading activity 'visible' to the broader market declined.

Suggested Citation

  • Andreas Schrimpf & Vladyslav Sushko, 2019. "FX trade execution: complex and highly fragmented," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:1912g
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    References listed on IDEAS

    as
    1. Nikhil Patel & Dora Xia, 2019. "Offshore markets drive trading of emerging market currencies," BIS Quarterly Review, Bank for International Settlements, December.
    2. Oomen, Roel, 2017. "Execution in an aggregator," LSE Research Online Documents on Economics 67454, London School of Economics and Political Science, LSE Library.
    3. Roel Oomen, 2017. "Execution in an aggregator," Quantitative Finance, Taylor & Francis Journals, vol. 17(3), pages 383-404, March.
    4. Martin D.D. Evans & Dagfinn Rime, 2019. "Microstructure of foreign exchange markets," Working Paper 2019/6, Norges Bank.
    5. Harald Hau & Peter Hoffmann & Sam Langfield & Yannick Timmer, 2021. "Discriminatory Pricing of Over-the-Counter Derivatives," Management Science, INFORMS, vol. 67(11), pages 6660-6677, November.
    6. Butz, M. & Oomen, R., 2019. "Internalisation by electronic FX spot dealers," LSE Research Online Documents on Economics 90485, London School of Economics and Political Science, LSE Library.
    7. Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Alain Chaboud & Dagfinn Rime & Vladyslav Sushko, 2023. "The foreign exchange market," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 12, pages 253-275, Edward Elgar Publishing.
    2. Alexander Barzykin & Philippe Bergault & Olivier Guéant, 2023. "Algorithmic market making in dealer markets with hedging and market impact," Mathematical Finance, Wiley Blackwell, vol. 33(1), pages 41-79, January.
    3. Alexander Barzykin & Philippe Bergault & Olivier Gu'eant, 2022. "Dealing with multi-currency inventory risk in FX cash markets," Papers 2207.04100, arXiv.org, revised Oct 2023.
    4. Philippe Bergault & Louis Bertucci & David Bouba & Olivier Guéant, 2024. "Automated market makers: mean-variance analysis of LPs payoffs and design of pricing functions," Digital Finance, Springer, vol. 6(2), pages 225-247, June.
    5. Batten, Jonathan A. & Lončarski, Igor & Szilagyi, Peter G., 2021. "Strategic insider trading in foreign exchange markets," Journal of Corporate Finance, Elsevier, vol. 69(C).
    6. Philippe Bergault & Olivier Gu'eant & Hamza Bodor, 2025. "To Hedge or Not to Hedge: Optimal Strategies for Stochastic Trade Flow Management," Papers 2503.02496, arXiv.org.
    7. Philippe Bergault & Louis Bertucci & David Bouba & Olivier Gu'eant, 2022. "Automated Market Makers: Mean-Variance Analysis of LPs Payoffs and Design of Pricing Functions," Papers 2212.00336, arXiv.org, revised Nov 2023.
    8. Andreas Schrimpf & Vladyslav Sushko, 2019. "Sizing up global foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, December.
    9. Huang, Wenqian & Ranaldo, Angelo & Schrimpf, Andreas & Somogyi, Fabricius, 2025. "Constrained liquidity provision in currency markets," Journal of Financial Economics, Elsevier, vol. 167(C).
    10. Ballensiefen, Benedikt & Somogyi, Fabricius & Winterberg, Hannah, 2026. "Demand for dollars: Evidence from survey expectations," CFR Working Papers 26-04, University of Cologne, Centre for Financial Research (CFR).
    11. Philippe Bergault & Leandro S'anchez-Betancourt, 2024. "A Mean Field Game between Informed Traders and a Broker," Papers 2401.05257, arXiv.org.
    12. Philippe Bergault & Pierre Cardaliaguet & Wenbin Yan, 2025. "Optimal hedging of an informed broker facing many traders," Papers 2506.08992, arXiv.org.
    13. Sirio Aramonte & Andreas Schrimpf & Hyun Song Shin, 2023. "Non-bank financial intermediaries and financial stability," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 7, pages 147-170, Edward Elgar Publishing.
    14. Hasbrouck, Joel & Levich, Richard M., 2021. "Network structure and pricing in the FX market," Journal of Financial Economics, Elsevier, vol. 141(2), pages 705-729.
    15. Alexander Barzykin & Philippe Bergault & Olivier Gu'eant, 2021. "Market making by an FX dealer: tiers, pricing ladders and hedging rates for optimal risk control," Papers 2112.02269, arXiv.org, revised Jun 2023.
    16. Harald Hau & Peter Hoffmann & Sam Langfield & Yannick Timmer, 2021. "Discriminatory Pricing of Over-the-Counter Derivatives," Management Science, INFORMS, vol. 67(11), pages 6660-6677, November.

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    More about this item

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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