The new platform will allow the smaller banks to connect directly with flow from large providers using what is known as relationship-based, disclosed, last-look liquidity. This means that the liquidity provider connects directly with a customer that is known to them before a trade occurs, and it gives the liquidity provider the right to refuse the trade pre-execution. EBS CEO Gil Mandelzis says EBS Direct represents a step-change from EBS’s traditional model of an anonymous, no-last-look broking platform used primarily by large banks transacting between one another. “We have confined our business over the last 25 years to this segment of anonymous trading in the spot market,” says Mandelzis. “The reality is our liquidity providers want to provide liquidity not just to anonymous pools of liquidity but to disclosed clients as well.” EBS Direct has recruited more than 100 second and third-tier bank customers to receive pricing on the platform, and the broker will onboard more customers soon, says Mandelzis. EBS Direct will be supplied with FX last-look liquidity by at least 19 bank providers named on Tuesday: ANZ; Bank of Tokyo-Mitsubishi; Barclays; BNP Paribas; Bank of America Merrill Lynch; Citi; Commerzbank; Credit Suisse; Goldman Sachs; HSBC; Jefferies Bache; JPMorgan; Morgan Stanley; Nomura; Nordea; RBS; Société Générale; Standard Chartered; and UBS. EBS Direct will launch in December, and Mandelzis says the platform will record a few trades over the month. The portal will then aim to achieve more momentum during the first quarter of 2013, he says. The platform will initially offer only spot FX trading across all the leading currency pairs, but EBS Direct will look to expand into non-deliverable forwards and other products. Mandelzis also did not rule out an FX options offering through EBS Direct. Jeff Ward, EBS’s global head of FX sales, is the new global head of EBS Direct and will be responsible for both roles at the broker. Measures of success Known liquidity on EBS Direct will give the second- and third-tier banks tighter pricing using a portal specifically designed for them, and the pricing on the platform will be shown in one pip and 10th pip increments, with a minimum trade size of $100,000. Mandelzis says EBS Direct will eventually roll out to “any client segment”, including institutional clients. Ward says there are also other, un-named banks that are providing EBS Direct with liquidity to the platform in addition to the banks announced on Tuesday. And Mandelzis says EBS is set to recruit more bank flow providers to EBS Direct. However, for EBS Direct to succeed, it will have to steal second- and third-tier bank brokerage business away from competitors in the space, such as FXall, Currenex, 360T and Hotspot FX, by offering lower fees, says one senior FX market player. Mandelzis says he is confident EBS Direct will find a comfortable niche among electronic communication network competitors through the provision of cheaper services and a technology offering that can easily be expanded.
“There are hundreds of millions of dollars that are being spent by the industry on completely redundant infrastructure and redundant services,” says Mandelzis. “People are spending way too much money and getting way too little value.”