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Clifford Lewis |
Online foreign exchange trading platform Currenex has announced a new strategy, new funding, and a new CEO, in a move to boost trading volumes and secure its future.
But this revamp raises more questions than it answers. The strategy is confusing and the CEO is an unknown figure. Currenex must act fast to support its promises.
The new image and direction for Currenex mark a crucial step for the venture, as it had previously suffered high-level departures. CEO Lori Mirek, appointed in 2000, left in late 2002, although this was only confirmed in mid-January. Mirek had been the public face of Currenex, speaking at conferences and liaising with dealer banks. Former managing director Roddy Boulton left in September. These and other departures sparked concerns that Currenex was facing financial and strategic problems and the gap in time between Mirek’s departure and the confirmation of a new CEO gave plenty of time for those concerns to take hold.
Rumours that Mirek had left circulated around the forex dealer community for several weeks, although confirmation of the move has still been unsettling. “I reacted with surprise and shock,” says one market source. “Lori was their front person. She was calling the shots. She drove that company. Now suddenly she has departed.”
Currenex, established four years ago, has appointed Clifford Lewis as its new CEO and chairman. The platform describes him as having more than 25 years’ experience in the financial markets, including a role at the Chicago Board of Trade and the World Bank. And he has been involved with Currenex more informally for several months. However, he is relatively unknown in forex – the market calls him “Clifford who?”
The rapid turnover in staff disconcerted some dealers but Lewis considers this a natural development, stemming from the platform’s early days as a utility for the corporate buy side. He says: “That attracted a lot of really high-energy geniuses from Silicon Valley. And that imagination was terrific. Now we are transitioning into a more mature financial services mode. Some people had different interests.” Some of these former staff have moved to companies that are Currenex clients, which may benefit it in the long term, but nevertheless, as respected staff left, questions were raised. One dealer decided to leave the platform.
The new maturity Lewis talks about is reflected in a change in location. The headquarters has moved from California to New York, although development staff will remain on the US west coast. Other offices are in London and Singapore.
Perhaps the biggest change is to target new types of buy-side clients. Lewis says that although he is not seeking to encroach on the core real-money client base of rival FXconnect, he does want to push into hedge funds. This marks a departure from the platform’s early strategy to focus on corporates.
Lewis’s main task is, he says, to explain to the dealers how well the platform is doing. Cynics might suggest that if those dealers were seeing large transaction volumes through Currenex, they would not need that. Lewis says: “The sell side in our world look at platforms through the lens of P&L. That’s the way we have to look at it. We are not an additional cost – we are adding revenue… I’ve got to deliver the bacon to these guys.”
The main part of that will come from boosting volumes. But talking to Euromoney, Lewis repeatedly sidesteps questions about volumes, saying only: “We watch the major pairs. We are very happy where we are.”
For its part, FXall, arguably the largest multibank internet trading platform in forex, has announced a new record in its trading volumes, transacting more than $9 billion in one day in January. It claims that this is not unusual. “We have been around for less than two years,” says Mark Warms, FXall’s general manager for Europe. “Give us time. By the end of this year, people will be even more impressed at how much we have achieved.”
Another part of delivering results to the dealers will come from improving trading and back office technology. Auto-pricing, introduced only last summer will help. Seven of Currenex’s more than 50 dealers use it at present: it reported that 12 did last November. A spokesperson says 10 more are due to link up soon. Some dealers have chosen for strategic reasons not to use the facility. Meanwhile Fxall, which has offered automated pricing since its launch just under two years ago, has this streaming link with almost all of its 43 dealers.
The case for focusing on processing technology has already been made by Fxall, and Currenex would benefit from doing the same. Warms says: “We are integrated fully with bank systems – we have products that meet the needs of every bank. We have the best functionality for every buy-side market segment. We are not worried about the competition. We are focused on delivering functionality for banks and clients.”
The extra funding is described as a final round of financing for the platform, which means that although Currenex should not need more funds to achieve profitability and make acquisitions, more cash could be made available. The financing comes from Shell, which has long been involved in its development, and from a venture capital firm.
It is unclear what those acquisitions will be, although they are likely to be to improve the platform’s technology. Lewis says these will be “not gizmo-driven”, and he enigmatically adds: “I wouldn’t say the driver here is synergy.” Targets may be companies offering processing services or clearing and reconciliation technology.
But Lewis goes further, hinting that he might be interested in rival platforms. “I think some of our rivals might be available,” he says. “Although I’m not sure what their value proposition is.” FXall and FXconnect are unlikely to be for sale. FXall is supported by the biggest forex banks and has healthy volumes. FXconnect is run by State Street and is widely used and highly regarded, particularly by asset managers. That leaves only smaller retail platforms, which generally cater to different clients. Lewis will need to move quickly if his new strategy is not to sound like empty rhetoric.
