Buy-side firms are increasingly looking to integrate foreign exchange trading into broader multi-asset execution management systems, with the ability to monitor risk across asset classes in real time emerging as the main motivation for consolidation, new research shows.
A survey of 65 hedge funds, proprietary trading firms and asset managers found that 69% still operate separate order and execution management systems for FX and listed derivatives. The research was conducted by Acuiti on behalf of capital markets technology provider Trading Technologies.
The study, published in a new white paper titled ‘Bringing in FX: EMS Consolidation in a Complex Trading Environment’, examines how institutional investors use FX trading technology and their appetite for integrating currency execution with other asset classes.
FX has traditionally operated on separate technology infrastructure because of the market’s fragmented over-the-counter structure, which relies on multiple bilateral relationships and liquidity venues. But the growth of centralised execution functions and cross-asset trading desks is prompting firms to reconsider the resulting technology silos.
The research suggests that consolidation is being driven by factors beyond cost reduction. A unified, real-time view of portfolio risk was the most frequently cited benefit, with 69% of respondents identifying it as a key consideration.
Improved execution quality was cited by 52% of participants, while 46% highlighted enhanced algorithmic trading capabilities.
The findings suggest that firms increasingly see a single trading environment as a way to improve decision-making, order controls and routing consistency across asset classes, rather than simply as a means of cutting technology and operating costs.
Migration itself remains the biggest obstacle to greater consolidation. Almost half of respondents identified the risks associated with moving from existing systems as the most significant factor that could prevent them adopting a unified workflow.
Ross Lancaster, head of research at Acuiti, said buy-side firms are increasingly reassessing their O/EMS strategies for FX and considering how currency trading could be integrated with listed derivatives and other asset classes.
The research found that 28% of firms would be more likely to trade FX if its order and execution management technology were integrated with systems used for other asset classes.
The findings point to a gradual shift towards multi-asset trading infrastructure, with institutional investors seeking greater visibility of risk and more consistent execution processes while remaining cautious about the operational disruption involved in replacing established FX technology.
