The FX Market
The FX market is the world’s largest and most liquid market with daily turnover of $5.8 trillion. It is quote driven, where financial intermediaries quote prices on Electronic Communication Networks (ECN) and trade with each other primarily on a bilateral basis. At every level of the market intermediaries quote wider spreads for smaller amounts. However, the quote driven trade matching and bilateral clearing/settlement also leads to lack of transparency, frictional costs and less efficiency.
In the interbank market and the large corporates segment, volumes are high and quoted margins thin. However moving out to other enterprise segments and retail customers, margins become substantial. A recently published study of pricing FX in seven major banks in the UK shows that Small Medium Enterprises (SME) pay appr. 2.50% to make Foreign Exchange (FX) bank transfer, which equates to around $25,000/$1.0 m.
In recent years a number of Peer to Peer (P2P) FX Platforms have entered the market with a disruptive exchange service for SME and retail clients. Through the use of innovative technology, P2Ps match bilateral FX needs at the midpoint of the interbank FX rates and via domestic payment systems, hence are able to provide a low cost service. Prices range from $1.000 – 5,000 / $1.0 m. Although P2Ps bring better transparency and lower transaction costs, the bilateral matching is inefficient in handling large currency volumes and settlement takes time.
CRYEX, with its unique order driven and centrally cleared (CCP) FX Spot market, will together with its clearing member partners disrupt the market further. With very high volume capability SME:s and other participants should be able to trade at a very disruptive price (a few hundreds) as compared to what the market currently offers (few thousands). In essence CRYEX value proposition will offer full transparency, lower transaction costs, and high volumes with T+1 settlement