Specialist calls for a level forex playing field

Speaking at the inaugural FX Invest congress in Chicago last Tuesday (April 3), Tai said the existing market structure does not yet reflect the blurring distinction between the buy- and sell-side.

"There will be people in the industry who will engage in the high-touch model, where you go to an end-service provider for their research, opinion and thoughts on flows. There will continue to be a need for that," said Tai. "But at the same time, as the evolution of foreign exchange continues, one needs to be aware of it and know how to benefit from this structural shift."

Tai pointed to the foreign exchange committee in New York, which acts as an ad hoc regulator, as an example of the inequality in the market with a bank-only membership. Similarly, he said, multi-contributor pages show the buy-side wider spreads than the actual transacted spreads that occur in the market-place.

"In the last three to five years there's been some demand for greater transparency, even among the data service providers," said Tai. "But we are not there yet."

He said some data vendors are grappling with the conflict between appeasing data contributors and the technology-led advancements in the industry that call for greater transparency. "There is no volume data, no time of sales data, we don't know how much was traded," said Tai. "Even a lot of the big players depend on information about flows from their selected key partners."

He said some of the buy-side's concerns of seeing residual flow could be resolved by a central exchange, with a central limit order book.

"In 2003, I asked whether within our career, the centralised exchange concept would come to fruition in foreign exchange. Maybe it's appropriate, maybe it's not, or maybe it's a mixture of the different business models."