Electronic trading: On-line prime-broking platform expands into Asia

Material opportunities in Australasia and Asia have come increasingly onto the radar screens of leading platforms eager to make profits from rising FX trading activity in local currencies across the region. According to the Bank for International Settlements, FX turnover in Asian currencies grew faster than the global total between 2001 and 2004 (see table below). Mounting speculation surrounding the possible revaluation of China's renminbi has been a key driver of interest in the region.

Hedge funds are among the most aggressive investors in Asian currencies, making them attractive customers for banks. PricewaterhouseCoopers estimates that there is more than $16 billion invested in hedge funds in Sydney alone, highlighting the importance for FX providers of extending their reach to these territories.

"This is a major step forward for our business in the Asia Pacific region," says Mark Monahan, head of global sales and service at EBS. "Professional traders from both banks and funds have the opportunity to see the market through the pre-screened credit of an EBS Prime bank. They can be certain they are seeing the best available prices in the market through the eyes of their EBS Prime bank, and that they are accessing FX liquidity."

Credit is an important factor in FX trading and EBS Prime was initially launched to enable smaller banks to gain access to the wholesale market by placing collateral with a larger prime broking bank. Earlier this year, this remit was revised so that members of the professional trading community also got access.

Bank of Tokyo-Mitsubishi is the first bank from Asia to sign up as a prime broker on EBS Prime, paving the way for more banks in the region to take a direct role in the interbank spot FX market. BOTM, part of Japan's second biggest bank, Mitsubishi Tokyo Financial Group, is the seventeenth bank to sign up to the service, which until now has comprised European and US-based banks only. "It marks a significant step in our strategy to bring EBS Prime to the global banking community," says Kazuhiro Ooki, head of Japan sales at EBS. "We believe this will bring more banks in Japan and the Asia region to the FX trading community on EBS, to gain access to better prices and liquidity."

In terms of end users in Asia, Seoul-based DBS Bank recently signed up with JPMorgan to receive prime brokerage services. It is the first Korean bank to take this initiative, sparking hopes that others will follow.

It is understood that EBS is also investigating the feasibility of rolling out the service to other Asian markets as soon as possible.