The second-largest US stock exchange operator by volume has revealed plans for expanding its currency trading by opening a UK-based foreign exchange platform.

BATS, which operates Europe’s largest equities exchange, will launch its Hotspot matching engine in a campus west of London later this year in order to target European and Asian currency exchange trading.

London has the cemented its position as the single largest centre for foreign exchange trading in the world, increasing its share of global turnover from 37 per cent to 41 per cent between 2010 and 2013, according to the Bank for International Settlements.

Average daily turnover in the London market hit $2.7tn in that period, driven by growth of 40 per cent in both spot currency and over-the-counter derivatives deals.

Hannah Randall of BATS said it wanted to spread foreign exchange trading between Hotspot’s main operation in New York and its new London base. Hotspot has 220 clients, including banks, hedge funds and retail brokers, and BATS purchased the platform earlier this month from KCG Holdings in a $435m deal.

The expansion into Europe comes as the large investment banks that dominate trading, remain under scrutiny over their role in the market.

A handful of banks have been fined for rigging trading around a key market benchmark. That has raised the prospect that broker-dealers may take more of an agency role, simply executing trades for customers.

Ms Randall said rising forex volatility and regulatory pressures were combining to make life difficult for traditional forex players.

“What we’re seeing is the traditional big banks moving from the proprietary model to a riskless agency-broker model, which we also see in equities,” she said

The role of large banks dealing in currencies was further brought into focus by the extreme volatility experienced by the market in the wake of the Swiss central bank’s decision in January to remove one of its currency caps, as liquidity dried up for some market participants.

Several currency analysts have been surprised by the size of other recent price movements, particularly in euro-dollar, the most liquid market pairing.

Since the US Federal Reserve’s latest policy statement on Wednesday, daily moves between the euro and the dollar have been extreme, which some analysts attribute to a lack of liquidity in the market.

Oliver Wyman, the consultancy, and Morgan Stanley, the investment bank, said in a joint report last week that the Swiss currency cap exposed some of the consequences of liquidity problems in forex.

“Many stop loss orders were rendered ineffective due to the lack of underlying principal liquidity in the stressed period, resulting in large losses for distributors acting as riskless principals,” the report said.

The Hotspot matching engine is located in Slough, also the physical home of a significant chunk of the UK capital’s trading infrastructure, with a host of stock exchanges, data providers and banks all locating their servers in the London commuter town.

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