The night before, the company’s PR sent out an email stressing that everything was to be treated as off-the-record. What with London’s weather at its finest, I was ready to let rip when I turned up soaking wet as well. Off-the-record briefings have their purpose, but on this occasion it looked a little bit uptight.
To my surprise, the meeting was useful, informative and quite good fun. Phil Weisberg, the company’s chief executive, and Mark Warms, its European general manager, were both in fine form. Although they were obviously there to tout the merits of their platforms, they managed to give the impression of being thought leaders in the industry. They touched on many topics, including the increased use of algos, the problems around sourcing reference data and the likelihood of platform consolidation.
The data issues may be the most important – at least in the near term – and could prove one of FXall’s trump cards. The Markets in Financial Instruments Directive (Mifid) in Europe takes effect in November, and despite what many people might seem to think, FX is not entirely exempt. Without getting bogged down in the endless debate of what constitutes best execution, clearly price plays an important role and the level a currency is trading at will need to be proved at various points along the deal chain.
In a lunch later on the same day with one of FXall’s sell-side users, I was told that many corporates are likely to increase their activity on the platform because of the clear audit trail the system can provide, from inception through to settlement. This slightly surprised me, because I thought that many traditional asset managers in particular were still erroneously clinging to the belief that the explicit rather than implicit cost of trading was more important. At breakfast Weisberg had argued that things were changing; at lunch I heard at least some of his claims supported by someone I thought would have been predicting that the single bank platforms were ready to sweep all before them.
I’ve always felt that certain platforms would survive because they have carved out a lucrative niche in what looks like an over-crowded market, despite its huge size. While I don’t believe that FX will ever move to a single venue, Weisberg said that those backing marginal businesses are unlikely to keep throwing good money after what could prove to be bad. In other words, some imminent consolidation seems probable. I agree. The question is, which platform is going to get consolidated first?
