Banks reported big drops in the revenue they earned from currency trading last quarter, the Wall Street Journal reports, reflecting both a decline in volume amid a relatively calm foreign exchange market and the growth of electronic trading. As more market participants switch to using electronic trading, banks lose the easy profits they made from matching up buyers and sellers. And e-trading is making the foreign exchange market more transparent and forcing banks to trim their bid-ask spread on FX trades.
The Journal argues that the FX market’s transition to e-trading will take more time than the stock market’s shift starting in the late 1990s, though, because the FX market is more decentralized and less regulated.
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