Who, what, when, where and how electronic trading?

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How can electronic trading platforms help to support the principle of best execution? Clearly, by definition, much of a trading platform’s raison d’être is based on the promotion of transparency and on the maximization of the information available on every trade, which in turn is an important part of the concept of best practices. Controlling operational risk, says FXall’s 2004 White Paper on Best Practices, “means knowing exactly the who, what, when, where and how details regarding any individual transaction.” One way in which that transparency is enhanced in the FX market is through visible benchmark fixings – independently published, fully auditable FX rates designed to provide an accurate and consensus-driven reflection of the market at a given time. With benchmark fixings from entities such as the Bank of England published on a regular and transparent basis, they allow market participants such as institutional investors and corporate treasurers to demonstrate that they have achieved the most competitive rate possible at the time of execution.
In February 2007, FXall announced the addition of benchmark fixings to its advanced
portfolio trading tool, QuickOMS, allowing clients to submit orders for execution at any one of a range of industry-standard fixing services from Citi, HSBC and RBS, each of which have made their full benchmark fixing services available through FXall. Commenting on the initiative at the time, a number of FX heads emphasized the key role that benchmark fixings are now playing as a component of best execution for their clients. “We recognize there is a growing demand for this type of service,” commented Alan Clarke, global head of e-FX at HSBC. “With independence of the pricing crucial to our clients, the data published in the HSBCfix is provided by WM/Reuters. This gives us and our clients a well established and respected independent source of foreign exchange rates, used widely by the fund management industry for portfolio valuations and performance measurement.”

The transparency embedded in the benchmark fixing was also emphasized by Martin Spurr, head of integrated treasury solutions at RBS. “We understand the importance of
transparent FX trading to every client sector and have been staggered by the rate of uptake of benchmark trading by our clients,” he said. “We see that this growth will continue, particularly as regulatory pressures such as MiFID are set only to increase.”