Icap pushes into options

Spencer also said although Icap has benefited from the experience it has acquired from EBS, the brand would eventually be phased out. Spencer said these plans are in line with his view of the markets becoming increasingly electronic. "The entire market is undergoing significant and rapid technology driven changes," he said, adding that Icap's purchase of EBS proves its commitment to electronic markets.

Spencer told the congress that increasing algorithmic trading and model development will be a factor in market change. "Electronic trading will allow FX trading levels to increase to $3 trillion a day," he said, which he predicts will allow growth in customer profits and further expansion of the hedge fund industry. Currently, 27% of trades conducted through EBS are algorithmic on at least one side, Spencer said, adding that 7% of EBS spot FX is now traded by high-velocity algorithms.

Spencer said he anticipates the development of FX algorithms that will be capable of more sophisticated trading than just completing pace work. He added that his instincts tell him that black box trades won't go above 50% of FX trading, and will stay in the range of 30–40%.

He added that although dealer-to-dealer trades are now entirely electronic, emerging currencies still rely on voice brokers. EBS said that this year it has added 93 manual workstations to its FX desk, significantly more than in previous years. Spencer anticipates that trader and sales roles will evolve with the technology of the business.

Spencer also believes the FX market is moving away from the idea of a monopoly exchange. He told the congress that each platform services its own "sweet spot", providing access to a specific market. Current participants have a plethora of choices of which platform or exchange to trade on, Spencer added, with niche platforms open up the market to more participants.

Spencer believes ongoing product development means there is a lot of life left in forex trading. "The variety of FX products means the potential for innovation is nearly limitless," he said, adding that the impact of the decentralisation and the merging of exchanges this year will also have long-term ramifications for the markets. "I view market change as an opportunity for innovation as well as a threat," he said.