Where now for foreign exchange?

FX Week editor Saima Farooqi looks back over the past 12 months and asks how the foreign exchange will now evolve?

This time last year the foreign exchange industry began proving its resilience to market shocks as the collapse of Lehman Brothers lead to a harpooning of interbank liquidity and credit.

A year on and in some respects it seems even those plans that were being constructed earlier that year remain largely on track, with slight tweaks to accommodate the crisis actually sweetening the deal. For example, the same eight dealers that looked to revolutionise the post-trade environment to support high-volume/low-value trading are back on track to roll out their ticket aggregation service by year-end.

The dealers were able to bring together ideas and concepts from rivalling factions, such as CLS and post-trade technology vendor Traiana in their mutually beneficial deal. Several potential providers were approached via a request for proposals, but, said CLS, the synergies between Traiana and CLS made it a compelling partnership.

CLS said that by leveraging the links that already exist with the CLS network and Traiana's post-trade experience they can offer a service that will fully address the needs of its clients without the need for complex, costly and lengthy implementations.

Additionally, CLS's pricing model has changed to support the value and volume model. The old volume-only pricing was no longer fit for purpose and was over-charging some members, CLS explained. The new pricing has delivered so far pretty much exactly what was required, that is, lower costs and a recovery level that meets CLS's plan. "The values which will migrate to the aggregation service are small. The loss of volume for aggregation will not lead to a price increase for settlement that would have been the case if CLS was not providing aggregation," said CLS. "We spent a significant amount of time in modelling our pricing structure to achieve an optimum outcome for the membership as a whole."

Now onto longer-dated foreign exchange transactions. Again, perhaps a bank-owned clearing house might sweeten the appeal.

Comments? Email saima.farooqi@incisivemedia.com