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Refinitiv - at the beating heart of global FX trading

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    September 14, 2022 8:48 AM +0430

    Refinitiv - at the beating heart of global FX trading

    Refinitiv maintains one of the world’s leading digital FX trading ecosystems – running not only electronic trading venues where buyers and sellers can connect, but also a range of software that covers everything from pre-trade analytics and news analysis, to post-trade regulatory reporting and tracking of deals.To get more news about forex trading, you can visit wikifx.com official website.

    In late January 2020, Refinitiv was contacted by the Central Bank of Guinea. The African bank had been working closely with the International Monetary Fund (IMF) to accelerate economic reforms, and, as part of the requirements for funding, improve the transparency of its foreign exchange (FX) markets. Until then, most of its foreign exchange deals were being conducted manually and mostly offline leading to opacity around trades being done and uncertainty around pricing of those trades.

    Refinitiv maintains one of the world’s leading digital FX trading ecosystems – running not only electronic trading venues where buyers and sellers can connect, but also a range of software that covers everything from pre-trade analytics and news analysis, to post-trade regulatory reporting and tracking of deals.
    What the Central Bank of Guinea needed was electronification of their foreign exchange trading process – a way of conducting these trades electronically and therefore with more transparency. Electronification represents not only the digitisation of these real-life workflows, but also makes them faster, more efficient and transparent. Electronified FX markets allow traders to deal in thousands of tickets a day online, augmented by automated workflows, using algorithms that ensure they are compliant with regulations at every step of the trade.

    Further driven by the COVID-19 pandemic that struck in March 2020 and the subsequent acceleration to the online environment – the need for electronification has never been greater. For New Guinea, Refinitiv deployed their FX Trading platform giving the local market access to more liquidity and a range of automated trade reporting tools, as well as Auctions, a software that gives users a real-time view of bid submissions. This was an invaluable collaboration that has enabled New Guinea to meet IMF’s reforms and requirements for funding, not to mention to build more resilience, efficiency and transparency into their FX processes across the workflow.

    At its core, FX is a simple concept: you buy one currency and pay for it in another currency, at a given rate, with banks providing the liquidity for the exchange. This has the economic function of facilitating trade and payments around the world. Any company that needs to buy equipment, fund factories, pay employees in different parts of the world, fundamentally depends on foreign exchange to keep its business running.

    Today, this simple concept powers a complex ecosystem that, via electronification, connects a multitude of agents — from the biggest banks in the world to solo trader desks in developing markets, from global regulator institutions to the infrastructure providers like Refinitiv. This ecosystem constitutes a market that, in the past three decades, evolved to be one of the largest industries in the world, with daily trades totalling $6.6 trillion. And behind that evolution stands a company that pioneered many of its innovative breakthroughs, Refinitiv.

    In 1981, at a time when all FX business was conducted over the phone, Refinitiv (then called Thomson Reuters) was the first to allow traders to do something unprecedented: communicate via electronic messaging. The company launched a software called Reuters Dealing System, accessible to subscribers of the Reuters financial information terminal — then ubiquitous in banks and trading offices — to be connected with other FX traders around the world, and negotiate and confirm deals via electronic text. “That was the beauty of Dealing, it was the first system that allowed traders to go from chat to electronic notification of the trade, which would then be captured with automated ticketing and sent to the back office for confirmation,” says Bart Joris, head of FX sell-side at Refinitiv. “It transformed the markets.”
    Eleven years later, Reuters launched another game-changer with the trading platform – Matching. “When banks did price discovery, they would need to call everybody else to see if there was interest,” says Joris. “We thought, how about creating an electronic platform where they can show their interest to everybody else, where they can put in a bid and offer on the screen.” Matching is a leading primary market venue linking bank and high frequency trading institutions.

    The natural evolution from that was another platform that instead connected dealers to customers, a third-party venue where customers could find banks and execute deals. “It used to be that people would need to make many calls to different banks to get different prices for one deal,” says Neil Penney, group head of FX at LSEG. “We created something where prices would go out electronically, and you could just click on the best price.”
    FXall made its first trade in May 2001. Today, FXall is the leading dealer-to-customer platform, connecting more than 2,400 clients with around 200 banks across 500 currency pairs. Matching, on the other hand, is still considered what’s called a primary market, as the trading data it produces is also used by the entire industry to benchmark FX trades. “Beyond just being a place where buyers and sellers come together, universally it is acknowledged as the trusted source of where many currency pairs in the world are trading,” Penney says. “It's a place that generates very valuable data which goes into regulated industry benchmarks, and banks use it to price out to their customers.” And Dealing, which recently completed 40 years of existence, remains widely used in developing markets in Africa and Middle East, where it remains the main platform for electronic trading. “I always ask people how many software products do you use that are 40 years old?” says Penney. “And the answer is none.”