Growing internalisation could threaten price discovery, say LPs
Dealers might have to deliberately hedge on venues to bolster data, says Credit Suisse’s Estrada
With the volume of foreign exchange spot trading carried out on external venues falling because of the high internalisation ratios at large banks, some dealers say the industry will need to be mindful that price discovery doesn’t deteriorate as a result.
Dealers typically try to match offsetting client flows on their own books before hedging them on external platforms in the interdealer market. This practice, commonly referred to as internalisation, helps to reduce spreads and decrease the
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