FastMatch, a joint venture between Credit Suisse and FXCM, has become the latest firm to launch an electronic communication network (ECN) for foreign exchange and is aiming to become a dominant force in the sector.
FastMatch, whose matching engine is located in the Equinix NY4 facility in Secaucus, New Jersey, has been beta testing its system for a month and plans to go live on July 1.
Credit Suisse has provided its Crossfinder matching technology, which the bank has used to create one of the world’s largest equity dark pools, and adapted it for the FX market. FXCM has put up cash, support services and, as the world’s largest retail aggregator, its liquidity.
FastMatch’s management also has a stake in the company, and it is looking for other investment partners.
Initially, FastMatch will be the matching technology behind FXCM’s business – it has more than 200,000 retail accounts and hundreds of institutional clients at FXCM Pro – but the firm plans to solicit liquidity from other retail aggregators.
Dmitri Galinov: “The ambition is to be the dominant venue for spot foreign exchange and other FX products.”
“It’s good on day one to get liquidity from our partner, and then we will add other firms into the pool,” Dmitri Galinov, chief executive of FastMatch, tells EuromoneyFXNews.
FastMatch also plans to source liquidity from other market segments and has the capability to build virtual rooms in its matching engine so that, for example, retail aggregators, institutions and banks can interact separately with each other.
“Because of the high-performance nature of this matching engine, we feel very good about the fact we are going to be able to draw in a variety of flows,” says Todd Sandoz, co-head of global currencies and emerging markets at Credit Suisse. “It’s one of the classic cases of where liquidity begets liquidity.”
Running start FastMatch believes it has an edge over other recently launched ECNs, such as traFXpure, FXSpotStream and Molten Markets, since it will be up and running from day one with a sizeable liquidity pool. It already has banks developing code to connect to its system, it says.
Indeed, Galinov, who was head of Crossfinder dark pool at Credit Suisse and helped it become the largest in the US, and before that helped grow Direct Edge from a small player into one of the leading destinations for US equities, says he knows what it takes to build a successful trading venue in spite of the competition.
“You have to have superior technology and you have to have superior liquidity,” he says.
Galinov says FastMatch has superior technology since it has adapted an equities system that is operational and can process billions of orders with “incredible speed”. The current system can process 1.2 billion messages a day and trades have a round-trip response time of 165 microseconds.
“Because of the Credit Suisse involvement with Crossfinder, we do have superior technology,” he says.
In addition, Galinov believes the liquidity from FXCM means that the venue is going to be very different from other start-ups.
“We have a good combination to create a major competitor in the market,” he says. “The ambition is to be the dominant venue for spot foreign exchange and other FX products.”