The previous version of Barx, released in May 2007, enabled clients to post their own bids and offers into the system. At the time, this was a radical move, although the orders were not displayed to other clients. Barclays admitted that as well as allowing its customers to potentially reduce their trading costs by saving the spread, it would also serve to build up its own internal liquidity pool.
This would seem to have worked. Nick Howard, Barclays’ head of FX and emerging markets distribution, says the bank’s electronic volumes have grown at a compounded annual 88% since 2003. Now about 80% of its spot business is transacted on Barx, and it manages to internalize a huge proportion of this.
The big difference with PowerFill+ is that clients’ orders are now visible anonymously (Barclays is always the counterparty) to each other. Tim Cartledge, Barclays’ head of Barx FX trading, says that the bank decided this made sense after numerous client visits. “Our clients have Barx and a multi-dealer platform,” he says. “Barx honours every rate and its liquidity is consistent, which is not necessarily the same on multi-dealer platforms. Clients were using Barx in more difficult markets, but would use the multi-dealer in quieter times. It occurred to me that we should bring them [both models] together.”
The benefit for clients is that they have the ability to trade in an ECN-like environment without paying commission. If the 10,000 or so Barx users fully participate, it should lead to consistently tighter spreads on the platform. What impact that has on Barclays’ internalization programmes remains to be seen. No doubt the bank has given this careful consideration.
PowerFill+ has additional functionality, including order types and algorithms, as well as the ability to trade through charts and Excel. “The choice of technology [Java] allows the use of Excel – this appeals to fund managers who want to get [a view of the] market liquidity into their models for transaction cost modelling,” says Cartledge. He also sees it finding favour with smaller hedge funds and prop desks.
