In the past few weeks new offerings have been announced from the CME and Reuters, Deutsche Bank (see: Space 2007: an FX market odyssey?, Euromoney June 2006), Calyon Financial and Lava. Meanwhile, UBS has confirmed it is not launching a new platform aimed at the retail segment but rather that it is enhancing its electronic offering to its private client base. Elsewhere, former EBS chief executive Peter Bartko has pitched up at eSpeed, where he is rumoured to be overseeing another foray into the market, and Currenex has added a host of new bells and whistles to its platform to please the algorithmic trading fraternity.
So it seems that despite all the talk of industry consolidation, the FX market is still fragmenting. It is one of those contradictions that seem to define it. They used to say in the old days that the FX pie was big enough for everyone to have their fill; now that it has got even bigger, it seems, at least on the surface, that it still is. With new platforms springing up left, right and centre, no doubt many of the big price providers will continue moaning about liquidity mirages, even if they have already got the t-shirt for that particular gripe.
Naturally, each new offering is accompanied by plenty of spin on how it is different from those that already exist. In some cases, this is actually even true. Looking at this month’s announcements, Lava says its new “revolutionary” platform “will provide the interbank community with an impressive array of sophisticated order types, full depth of book and superior functionality for electronic foreign exchange trading”.
The company adds: “Notably, it will provide a feature never before available to the FX market, which will allow banks to shift large positions quickly and quietly among themselves within a ‘blind’ system.” In other words, it will have a block trading facility.
Whether or not the FX market actually needs a new interbank platform was discussed, at length, in December’s Euromoney. David Ogg, chief executive of LavaFX, believes it does. “The [interbank broking] market has had a duopoly for 13 years,” he says. “Banks have been looking for an alternative for a long time. This new product is much more sophisticated and it has different features and more advanced technology.”
Ogg adds that Lava has devised a unique and innovative way to handle block trades. For the moment, most players in FX seem reluctant to show which way around they are, which makes the negotiation of block trades pretty much impossible. “We’ve come up with a clever solution so people don’t have to show their hands,” says Ogg. It remains to be seen whether the FX market is yet ready to accept such functionality, or indeed trade on a platform that is owned by Citibank. Time will tell.
Calyon Financial, the brokerage arm of Calyon best known for its activity in the exchange-traded environment, has also announced the launch of a new online platform. Calyon Financial FX Edge, it says, will provide customers with access to streaming liquidity supplied from the world’s leading foreign exchange institutions. For trades executed via the platform, Calyon Financial says it serves as counterpart to both the customer and the liquidity providers. “This allows customer trades to remain anonymous to the market, ensuring pricing neutrality,” it says.
The platform’s architecture is supplied by Integral using the vendor’s FX Grid network. Using this allows Calyon to hook its client base up with 13 FX market makers. However, as many of those leading FX liquidity providers already seem to have got their knickers in a right old twist about anonymity, it is hard to see how this latest venture is going to help them untie the knots.
Finally, at least finally for this month, Currenex has unveiled its catchily titled CX SmartOrder Algorithmic Trading module. “This platform is another important addition to our portfolio of trading technologies that better serves our users,” says the company’s chief executive and chairman Cliff Lewis. The platform runs locally on users’ computers, and models can be added and modified as they see fit.
