Is Thomson Reuters’ Purchase of FXAll Paying Dividends?

You may recall, Thomson Reuters (a renowned data provider and liquidity provider) acquired online broker FXAll back in June. Thomson Reuters was looking to provide greater innovation for its clients by diversifying away from being just a data-provider. Folks over at Thomson Reuters thought that integrating their platform to that of FXAll’s would lead to better execution, making their clients’ trading experience smoother.

After finishing all the paperwork and logistics, the deal was finalized this past August. The question now is, how has Thomson Reuters fared so far after the acquisition?

Recent reports actually show that institutional trading volume dropped in October for most liquidity providers and Thomson Reuters was no exception.

On a daily basis, Thomson Reuters’ average trading volume was at 120 billion USD during the month, which translates to a 10% decline from 133 billion USD in September. Volume is also down from the 155 billion USD mark from a year ago.

Meanwhile, EBS – Reuters’ main rival in the dealer market – has seen its own volumes fall to just 92.6 billion USD. Not only was this 17% lower than September’s figure, but it was also 46% below what we saw in October 2011. Moreover, it marks a 60% decline since the peak of EBS’ activity of 253 billion USD in March 2008.

As for FXAll, the leading dealer for non-financial corporations and asset managers, it finally surpassed EBS in second place, as FXAll’s average daily trading volume hit 94 billion USD last October. While this was a 10% drop from September’s levels, it is still 9% up from levels a year ago.

This means that Thomson Reuters now controls the two largest dealers in the FX market – its own and FXAll! But before we can declare their purchase as a success, I think we gotta take a step back and pop a chill pill.

First, take note that many institutional traders sat on the sidelines in October ahead of the U.S. elections. These traders may rush back to the markets and reestablish their positions now that we know that Obama will be back in office for another four years.

Second, it may take a few months before we can truly see whether the synergies between Reuters and FXAll really pay dividends.

Moving forward, it’ll be interesting to see whether volumes continue to drop. Take note that the recent trend in the forex market is gearing towards consolidation. If trading volume does continue to decline, it may force smaller dealers and brokers to reconsider their business models, or worse, consider selling themselves to the Thomson Reuters and EBS’s of the world.

I’ll be sure to hit y’all up early next year with an update on trading volumes and whether or not the Thomson Reuters – FXAll relationship is paying dividends!