NDFs have established themselves as an important cog in the FX machine. According to the latest Bank for International Settlements (BIS) triennial survey, total NDF daily turnover was $127 billion, as of 2014, around 19% of all forward trading globally and 2.4% of all currency turnover.
Providers have been keen to manage this growth by resisting the temptation to launch too many new NDF products for fear of cannibalizing liquidity.
In 2014, BIS attributed the growth of the NDF market to an increased buyneurontinonline desire to hedge EM exposure in anticipation of US tapering. Institutions were looking to hedge the exposures order lexapro uk they had built up over several years in local currency bonds – while EM firms were also looking to hedge their dollar exposures.
Although these factors are still in play, trading among hedge funds and other buy-side institutions has not met expectations over the past year, say market players, citing regulatory and liquidity concerns, the cost of setting up new infrastructure, and competition posed by other FX products.
Jon Vollemaere, CEO of R5FX – a new electronic NDF trading platform that was built partly to help resolve such challenges – acknowledges the challenge for institutions processing large volumes of NDFs.
“It’s not uncommon to spend all day slowly working a big order,” he says, adding some market participants have placed iceberg orders to overcome this problem.
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