LONDON (Reuters) – Liquidity, or the ability to buy and sell currencies whenever needed with minimal market impact, is seen by currency traders as the biggest challenge for 2019, according to an annual client survey by JP Morgan published on Tuesday.

The views of the biggest 200 institutional trader clients, mostly focused on the $5.1 trillion a day foreign exchange markets, polled by JP Morgan point to a tricky year ahead.

As electronic trading platforms have proliferated and banks and investors ramp up the use of complex foreign exchange algorithms, currency markets have become vulnerable to a drop in liquidity, causing sudden episodes of wild market moves.

The most recent example of such “flash crashes” was the sharp moves in the Japanese yen at the start of the year, which were seen as exacerbated by a dearth of liquidity with Japan still on holiday, and by automated algorithmic trades carried out by computers in micro seconds.

The availability of trading liquidity tops the list of daily trading issues for JP Morgan’s clients, identified by 40 percent of those polled. This was followed by efficiency of trading process.

The implementation of new trading rules in Europe since the start of 2018 has also made the overall liquidity environment slightly more challenging at a time when major central banks are unwinding their multi-year stimulus measures.

The survey also predicted that 80 percent of JP Morgan’s clients’ trading volume would flow through electronic trading channels by 2020. Trading via algorithms is expected to see a significant jump in coming years, according to the survey.

“With the growth of electronic trading, there is a lot more activity in FX markets and market participants are investing a lot in technology,” said Scott Wacker, global head of e-commerce sales and marketing at the U.S-based bank.

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