Refinitiv to launch NDF matching and streaming next year

Matching and streaming of NDFs could create larger liquidity pool and boost their electronic trading

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Refinitiv will launch non-deliverable forward (NDF) streaming on its bank-to-client trading platform, FXall, in the first half of 2020, says Neill Penney, managing director and co-head of trading at Refinitiv.

NDFs on Matching, Refinitiv’s interbank central limit order book, will go live early next year, as the NDF market grows and electronic trading of the derivatives matures. 

“[NDF] market participants are looking for a greater choice in where they execute,” says Penney. “We see the addition of NDFs to Matching as enabling more market participants to trade NDFs electronically as well as creating a unique liquidity pool for larger market participants.”

The average daily volume of NDF transactions jumped to $258 billion in 2019 from $134 billion three years ago, according to the 2019 triennial FX survey released by the Bank for International Settlements (BIS). A large part of the pick-up in outright forwards was due to a spike in the NDF segment, the BIS said.

“Within the various instrument categories within outright forwards, NDFs accounted for a significant share of the increase in trading between 2016 and 2019, reflecting in particular the strong activity in Korean won, Indian rupee and Brazilian real NDF markets,” the BIS survey noted. 

Increased interest in NDFs has brought significant investment and progress in the ability to quote NDFs, which in turn will help boost the volumes of NDF transactions, the Global Financial Markets Association says.

Given widespread currency restrictions across the region, Asia accounts for four of the top five traded NDF currencies globally – KRW, CNY, INR and TWD.

Electronic trading of NDFs is also on the rise. According to the Bank of England’s semi-annual FX turnover figures, about 40% of the $137 billion NDF transactions were traded on electronic broking systems or other electronic trading systems in London in April, up from 33% four years ago.

The availability of NDF matching in the interbank FX market will help with NDF price streaming in the dealer-to-customer market. 

“There is considerable demand from buy-side participants to trade on streaming NDF prices, and an increasing number of market-makers are able to stream live NDF prices,” says Penney. “We are currently enhancing our FXall price stream service with NDFs and looking to launch in the first half of next year.” 

Electronic trading to onboard more EM Asia currencies 

After launching the matching service in Vietnam to create the first electronic market-place for trading the Vietnam dong (VND), Refinitiv says it will bring a similar service in other EM Asia countries. For countries such as Thailand, where matching of local currency is already available, it is looking to expand electronic trading to the dealer-to-client market. 

“When the interbank market starts to become electronic, it is easier for banks to offer electronic trading to their clients,” says Penney. 

Besides offering liquidity, matching will also bring higher levels of transparency for EM Asia currencies trading. “The trading model is an all-to-all model with firm liquidity. In other words, there is no tiering of prices for different participants and no last look,” says Penney.

Since the launch, more than 30 major market players have signed up to trade USD/VND through the firm’s Matching platform, Refinitiv says. 

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