Banks struggle to keep trade flows in-house during volatility
Directional markets in March tested dealers’ ability to internalise risk
Dealers cut the amount of foreign exchange trading they matched off internally during March, as one-way markets prevailed during the volatility spike, firms report. As a result, some dealers were forced on to external platforms to find hedges, pushing up the cost of the original trades for clients.
“If most clients are on the same side you need to go to the external markets. It has been prevalent across the market,” says Mauricio Sada-Paz, global head of electronic fixed income, currencies and
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