Morgan Stanley, a major US multinational investment bank, announced on Friday that it is starting to offer clients the option to trade listed forex via the Eurex platform.
According to Reuters, Morgan Stanley’s launch of the service follows pressure from regulators and some market players, notably exchanges, to move FX derivatives trading from murky over-the-counter (OTC) markets to listed platforms.
The Eurex derivatives exchange is owned by Deutsche Börse and headquartered in Frankfurt. Eurex has become a key evolutionary step in the expansion of the company’s footprint into Europe, while it previously offered listed FX derivatives trading.
Listed FX derivatives account for only 1% to 2% of global FX derivatives trading, but their market share has grown rapidly in recent years.
In the derivatives market, players are increasingly using both OTC and listed FX products in tandem, benefiting from the depth available in OTC and the more transparent and efficient central clearing of contracts available in listed FX products.
Additionally, asset managers are turning to listed FX as a result of increasingly difficult market conditions. According to Jens Quiram, the Global Co-Head of FIC derivatives and repo sales at Eurex, the market is looking for efficiencies due to rising funding and capital costs. Also, liquidity has decreased and spreads have widened.
Eurex recorded its highest FX trading volume in June, as 162,000 contracts were traded, including a 5.9 billion euro block trade. So far this year, Eurex FX has traded about 820,000 contracts, which is up 190% from the same period in 2021.
FX Options Book
A recent report published by Risk.net shows that Morgan Stanley Investment Management (MSIM) has decreased its foreign exchange options book by almost 33% in the first three months of 2022 amid broader market contraction.
