MAY 2021

The EBS Report

Spot | Forwards | NDFs | Metals

Welcome to The EBS Report – covering product, technology, and key trends in one of the world's largest and most liquid FX markets.

  • 26 Apr 2021
  • By CME Group

The role EBS plays in global markets – and how to take advantage of our functionality

The award-winning anonymous FX matching platform, EBS Market, has been at the heart of the FX market for more than 20 years and remains the benchmark – connecting buyers and sellers of currencies in over 50 countries across six continents. The role of EBS Market is to facilitate a healthy FX market ecology for the benefit of all market participants, delivering the technology, connectivity and highly liquid, executable opportunities that professionals require to trade with each other on a level playing field.

The platform is recognized as the market reference for spot EUR, JPY, CNH, USD and CHF currencies, and provides insight into true market prices for spot FX, precious metals, and NDFs.

Certainty of execution & multiple execution styles

EBS Market provides orderly and executable liquidity across all major and emerging market currencies. It also provides advanced order types, including the EBS Iceberg Order, eFix Matching, Pip Discretion and Loop Orders for customers’ differing execution requirements. Each of these factors contribute to the certainty of filled orders in times of stress. This also highlights our belief that it is beneficial for clients of all size to have access to the primary market as a source of liquidity.

EBS Iceberg Order - allows participants to minimize the market impact of their orders by only displaying a portion of their overall order. The hidden size remains in the order book and is subject to being dealt.  Iceberg Orders consist of a shown amount and hidden amount, for which the minimum required, and maximum permitted values differ by currency pair. The shown size has absolute priority over the hidden size at a price level and the hidden inventory will always be done on a sweep before the next price level deals. Using this EBS order type means the market cannot trade through the price level until the total order amount has been fully satisfied. Order replenishment joins the bottom of the order book at that price point.

eFix Matching - a form of trading which allows participants to submit Fixing Orders, which may only match with other Fixing Orders. Fixing Orders match on institution (prioritizes self-match), time priority. They can match immediately to any opposite interest (including a partial match); however, the fixing price and counterparty will not be known until the fixing price is determined and distributed. Participants can also only load Fixing Orders for the current trading day.

Pip Discretion - allows participants to algorithmically manage an order as both a Maker and a “hidden” Taker, without risk of a double-fill. The “hidden” order type allows participants to pre-stage an aggressive order which will improve their ability to execute on prices that may have been previously missed. For each order, a trader may define a dealable range up to/down from the shown limit price that is displayed in the order book. The full order amount is visible in the order book at the limit price but the Pip Discretion range defined is not visible.

Loop Orders - can be either a bid loop and/or offer loop. In the case of a bid loop, if ‘given’, an offer will be automatically activated. In the case of an offer loop, if ‘paid’, a bid will be automatically activated. A loop order may be designated as partial or full. The partial or full designation will determine whether the take profit leg is triggered upon any or all the amount having been dealt.

EBS Market – The Matching Process

For a match to be made in EBS Market between two participants, mutual credit must exist between those participants. Once an order is submitted, EBS Market will immediately attempt to match the instruction with a bid/offer of better or equal price. Each match attempt is prioritized for Spot - price, region, time priority order and for NDFs – price, time priority order. All EBS Market orders are subject to Latency Floor (a precursor to the EBS Market Matching process, which is aimed at ensuring that speed as a standalone strategy is not a pre-requisite for success on EBS Market).

FX Code of Conduct

The FX Code of Conduct (the Code) is published by the Global Foreign Exchange Committee. The Code was designed to provide a common set of guidelines, covering all market participants, to promote the integrity and effective functioning of the FX market.

EBS played an active role in the development of the code, participating in the Market Participants Group (MPG), as well as being active in the feedback and review process via our representation on Foreign Exchange Committees during the creation of the code. Market participants can choose to notify of their compliance with the Code to indicate their support of best trading practice. As part of our ongoing commitment to the code and its adoption, the Market Participants Statement of Commitments hosted on the register will be shared with the Global Foreign Exchange Committee for inclusion in their register that can be viewed at the following link:

Efficient execution of large FX risk on EBS Market

EBS Market hosts a unique liquidity pool that we believe gains significance when macro factors are at play. For example, on February 25th, 2021 there was a large move in fixed income markets. This move led participants who were looking to hedge large amounts of directional risk to turn to EBS Market for deep liquidity and passive order execution.

The platform witnessed a surge in USDJPY trading volumes amidst a rise in US yields.

As shown above (data source: EBS Quant analytics), EBS Market saw a ~15% increase in top of book volume at this time. There was a significant reduction in the spread cost of transacting large volumes on the platform. Participants were able to hedge their FX risk with minimal market impact through deterministic matching of interest on the other side of the trade.

The below chart from EBS Quant analytics tool also shows that USDJPY spreads were compressed and there was a 15% reduction for the whole of the London morning session. As a comparison, that spread compression did not occur on the EBS Direct platform.

The below chart from EBS Quant Analytics tool shows the intraday price action in USDJPY on February 25th 2021 with relative volumes plotted from EBS Market and EBS Direct. Significant trading interest was matched on EBS Market amidst relatively contained price volatility and market impact.

USDJPY Price and Relative Volume Chart on 25 February 2021

We have brought CME Group’s distinct trading modalities of listed and spot FX together in one new tool, so that FX traders around the world can compare and analyze the complementary liquidity available in these markets.

Launch tool