88 CHAPTER 3. SPOT MARKETS FOR FOREIGN CURRENCY
Table 3.2:EBSvReuters D2: who leads, who follows, who fails
EBS Reut EBS Reut EBS Reut
primary primary (cont’d) Cross against EUR
EUR/USD + +/– USD/RON – EUR/AUD –
AUD/USD +/– + USD/RUB + EUR/CAD –
GBP/USD +/– + USD/SAR + EUR/CHF + +/–
NZD/USD + USD/SEK – EUR/CZK – +
USD/CAD +/– + USD/SGD – + EUR/DKK – +
USD/CHF + +/– USD/THB + EUR/GBP +/– +
USD/CZK – USD/TRY + EUR/HUF – +
USD/DKK – USD/ZAR + EUR/ISK +
USD/HKG – + EUR/JPY + +/–
USD/HUF – Other cross rates EUR/NOK – +
USD/ILS + AUD/JPY – EUR/NZD +/–
USD/INR + AUD/NZD +/– EUR/PLN – +
USD/ISK – CHF/JPY – EUR/RON –
USD/JPY + +/– GBP/JPY – EUR/SEK – +
USD/MXN – + EUR/SKK +
USD/NOK – EUR/TRY –
USD/PLN – + EUR/ZAR +/–
+: primary liquidity source; +/–: supported, but liquidity not good or not stable;
–: supported but not used in practice. Rates are expressed following the “name”
convention, not the dimensions. Source: http://www.londonfx.c.uk/autobrok.html, feb 200750” (=R).^9 You see theEBScounterpart of Reuters 3000 in Figure 3.5. Any party
interested in one of these offers can then click on the quote they like (either the bid
or ask) and specify the quantity taken. Or another bank may enter a limit order that
is automatically matched, wholly or partly, with an already outstanding limit order.
Reuters’ computer then informs theITsystems of both banks of the transactions
that were concluded so that no more human intervention with “tickets” and telexes
and faxes is needed (straight through processing,STP).
The decision by anFXtrader whether to useEBSor Reuters Dealing 3000 (aka
D2) is driven largely by currency pair. In practice,EBSis used mainly foreur/usd,
usd/jpy,eur/jpy,usd/chfandeur/chf, and Reuters D2 is used for all other
interbank currency pairs. Have a look at Table 3.2 to see who leads where. In these
multilateral electronic dealing systems, the spread foreur/usdis typically one pip,
that is, one hundredth of ausdcent. (Online currency brokers targeting private
investors typically offer a 2-pip spread; just feed “foreign exchange” into your web
search engine to find these brokers.) For other exchange rates spreads are often
(^9) The quotes are, again, “small numbers” and the quantities mean millions of dollars. Remember
also that, for traders,eur/usdmeans “the value of the Euro in dollars”.