Yesterday, in an article appearing in the Wall Street Journal, Alexandra Fletcher reported that electronic trading of foreign-exchange options could be set for a boost after one of the market’s best-known dealing systems, FXalliance Inc.(FX), said Monday that it has started to offer trading in the instruments.
Trading based on pools of prices from several banks at once has been commonplace in the simpler spot FX market for the past 10 years, with the shift online contributing to lower trading costs across the board. But options, which give users the right, but not the obligation, to buy or sell a currency at a fixed rate in the future, have proven too complex, because their different time scales and other variables have made it tough to combine different banks’ prices into one place.
This move by FXall, as it is better known, is the industry’s most high-profile push into a market that has up to now been dominated by the phone.
“There hasn’t been a big take-up in previous electronic options products because customers have been looking for something more than just a click-and-deal function,” said Phil Weisberg, chief executive of the newly-listed FXall in a phone interview. “It had to be an evolutionary process to take this market off the phone to online.”