Paul Caplin on the bright future ahead for single-dealer platforms.
Far from signalling the end of single-dealer
platforms, the impending raft of new regulation in the US and
Europe will create a new business environment in which the
direct online channel is more important than ever for both
banks and their clients, says Paul Caplin.
Soon after the publication of the Dodd Frank act in the US,
some early commentators suggested that the forthcoming
prohibition of bilateral trading of liquid swaps signalled the
death knell of single-dealer platforms (SDPs), the
banks’ proprietary online trading
But, as with Mark Twain, reports of their death were
greatly exaggerated. Far from backing away from SDPs, virtually
all tier one banks – and many smaller firms –
have responded to the imminent shift in market structure by
increasing their spending on SDPs.
According to FX Week, the head of foreign exchange at
a top-tier bank recently described this as the "secret weapons
program now under development at most banks".
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