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Icap and City Index: Relatively speaking

Readers will know that I used to be an Icap shareholder. If I still were, I would be looking to ask the company for greater clarification of a deal it did this week with City Index, a company controlled by the private investment vehicle, IPGL Limited, of Icap’s chief executive, Michael Spencer.

Icap has entered into an exclusive market data partnership with City Index to provide it with EBS spot prices. City Index says it will use the information to show clients that use its FX Solutions platform that effectively they have not been striped up and forced to deal away from the market price.

“This will give retail clients confidence in the integrity of FX Solutions prices, which is a major factor when dealing in off-exchange products,” says Tom Plaut, co-founder and co-chief executive of FX Solutions. “The EBS platform is where prices originate in the major currency pairs, and we are proud that Icap has selected FX Solutions as its exclusive retail FX market data partner,” he adds.

My first thought was that the deal looked monopolistic. A contact in retail FX goes a stage further. “You would think that these days, corporate governance reforms would disallow such deals... actually, it doesn’t matter that much given the FXSol and City Index business model in currencies is to make a market and keep risk on their books,” he says.

His last point is probably a bit too strong. There is nothing wrong with FXSol effectively trading against its clients, provided it is not striping them up by shading prices.

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