Fragmentation is not just a part of liquidity in foreign exchange markets, it is also often the best way to describe the biggest problem that sell-side market participants grapple with on the technology and infrastructure side.
Local client franchises have become the trump card in liquidity provision in recent years, giving rise to regional and local-market banks looking for electronic trading solutions from price generation through to distribution to capitalise on their axe.
"In the past year we have seen more and more players replacing existing solutions that were outdated. There is an increasing need for end-to-end platforms, such as smartTrade LiquidityFX, which in addition to connectivity and aggregation also includes value-added functionalities such as distribution," says Annalisa Sarasini, global head of sales at smartTrade Technologies.
What we see as a winning point for smartTrade is being able to replace three or four vendors with one single platform that provides all the bits and pieces people expect
Annalisa Sarasini, smartTrade Technologies
LiquidityFX, smartTrade's hosted liquidity aggregation tool, has won the Best e-FX Distribution Platform award at this year's FX Week e-FX Awards, due to the popularity of the technology across both buy- and sell-side market players.
"What we see as a winning point for smartTrade is being able to replace three or four vendors with one single platform that provides all the bits and pieces people expect," she adds.
Since its launch in 2012, LiquidityFX has moved from covering just spot FX to include non-deliverable forwards, forwards, swaps and CFDs, in response to clients' requests for a single solution able to work on a multi-asset basis.
"We also have an internaliser, so you can expose clients' orders as internal liquidity, and you can create different liquidity pools to diversify your source of liquidity," she adds.
The vendor has also extended its connectivity solution through the recent addition of multi-bank platforms such as Bloomberg, 360T, FXall and Currenex, and it has been working on a system that enables clients to transport voice trades into electronic and auditable format.
A transaction cost-analysis tool is also in the beta-test phase, Sarasini says, which will give smartTrade's clients additional visibility on what is happening on the platform, what their return is, how they can optimise their flows and how they can better manage their liquidity.
The company has been working with R5FX, the emerging market non-deliverable forwards platform, to widen its access to more currencies, thus enabling its clients to access a broader range of instruments, such as the real, rand, renminbi, ruble and rupee.
"What has made us successful is the fact that we offer an integrated solution, including an order-management system, which means clients don't have to seek complementary providers," says Sarasini.