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Capital Markets

EBS primed for change in online FX

Bank FX traders are up in arms about the plans of EBS, the interdealer FX broker, to allow hedge funds onto the platform. EBS says the pilot phase, which ended last month, was a success. Bank traders say it will create unstable trading conditions, and are beginning to talk about taking their liquidity elsewhere

EBS's client platforms | The client experience

Banks are set to lose spread revenue trading foreign exchange, face a heightened risk of being left holding more loss-making positions and could bear the brunt of any collapse of an FX trading hedge fund.

These are the fears FX traders at some of the leading banks are entertaining now that their largest inter-dealer market-making system, EBS, is pushing ahead with plans to allow buy-side clients to trade on the platform alongside them. It's even prompting some traders to question their commitment to market-making on the platform they set up. Some are talking about taking their liquidity elsewhere.

In May last year EBS launched EBS Prime, a service aimed at smaller banks, and followed that up in December with a four-month pilot programme for the buy side called EBS Prime Professional (see box).

Increase of hedge fund trading

Bank traders, especially spot desks, are the main users of EBS, responsible for most of the $110 billion of its average daily volume last year. That's increasing.

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