Informist, Monday, Jul 18, 2022

MUMBAI – Electronification of forex markets may be leveraged to pool information from various venues and make it available to all market participants to increase transparency, according to an article in the Reserve Bank of India's July bulletin. 

"Electronification of FX markets provides a unique opportunity to enhance transparency for further development of the market," said the article, titled 'Electronification of FX Markets – Trends in India'.

In India, a significant portion of the rupee spot market is traded electronically on multi-bank platforms operated by Refinitiv, Clearcorp, 360T, and Bloomberg, while the bulk of the derivative transactions are executed over the counter.

The emergence of new forms of trading venues, such as single-bank platforms and market-makers, including principal trading firms, has resulted in growing market fragmentation.

In 2020, the share of multi-bank platforms in the interbank FX spot market was 60%, single-bank platforms 11%, and over-the-counter and other venues had 29% share. 

Although electronic trading platforms generally provide better transparency compared to traditional over-the-counter trading, the presence of multiple electronic trading platforms has ensured that this information is not easily accessible.

Electronic trading platforms disclose information about trades executed on the platform only to their subscribers or members.

The RBI article suggested that data on traded prices should be collected directly from all venues, electronic as well as over-the-counter, on a real-time basis by the trade repository. Publicly disclosing this consolidated data will allow easy access to price information on a near real-time basis to all market participants.  End

Reported by Richard Fargose
Edited by Avishek Dutta

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