Forex Market Gets New ECN With FXall's Accelor
February 26, 2007
The system is not the first in foreign exchange to call itself an ECN, with functionality similar to the e-trading platforms that transformed equities trading in the late 1990s with displayed, immediately executable quotes. But FXall, which is bank-owned and -developed and last year attracted a $77.5 million minority equity investment from Technology Crossover Ventures of Palo Alto, Calif., is stressing its ECN-like neutrality and anonymity in a bid to solidify FXall's position in the rapidly consolidating, scale-intensive electronic foreign exchange (eFX) market.
For the ECN, the company adopted the
brand name Accelor to differentiate it from the FXall platform that
opened in May 2001. The latter is focused on "relationship
trading," an analog to the traditional voice-telephone brokerage
business, connecting banks as natural forex market makers to the
buy side, corporate customers and other counterparties, explained
Mark Warms, FXall's general manager for Europe and global head of
marketing, based in London.
Warms noted that over the last several years, as interest from hedge funds and others helped turn forex into a full-fledged investment asset class, new eFX providers entered the market to cater to more-aggressive, often model-based or algorithmic trading styles. "We had the leading system on the relationship trading side," said Warms, with more than 60 top global banks on the platform and thousands of institutional users. FXall now seeks to fill a gap with an ECN providing "anonymous liquidity in a certain number of currency pairs," with a "completely different model" from that of the original, parallel FXall.
FXall said last month that its volume in 2006 jumped 45 percent, to $9.8 trillion; average daily volume in December was $47 billion, and peak days have exceeded $75 billion. FXall has been asserting staying power in a market that, despite being the biggest of all financial markets at more than $2 trillion in total daily trades, has seen a shakeout in the fast-growing eFX segment. Most recently, Currenex, a venture that, like FXall, dated back to the dot-com era and that claimed a peak-day volume of $108 billion, agreed in January to be purchased for $564 million by Boston-based State Street Corp., which developed the pioneering FX Connect platform as part of its investment servicing business in the mid-1990s. Hotspot FX, which built a sizable hedge fund business, was bought by Jersey City, N.J.'s Knight Capital Group last April for $77.5 million.
Warms pointed out that as the shakeout has progressed, new offerings or ventures such as the FXall ECN have become a relative rarity. Reuters Group, already a major force in forex, in 50-50 partnership with the Chicago Mercantile Exchange is nearing the launch of FXMarketSpace, which expects to make a global impact across all market-participant segments with a centrally cleared processing model.
Also in the mix is London interdealer brokerage Icap, which last year acquired EBS, a bank-consortium-owned company that was Reuters' chief rival in spot trading systems. Average daily counterparty volumes on EBS platforms, single-counted, have risen to $145 billion from $100 billion three years ago, Icap said. Earlier this month, in collaboration with New York-based post-trade forex systems company Traiana, Icap said it had developed a system called NetLink, enabling providers of prime brokerage services to net their customers' FX trades by currency pairs at predefined points during the day. It's a response to the proliferation of high-frequency trading, promoting risk and cost reduction by netting down the trades to a smaller number of tickets. Streamlining the process "provides the banks with a more efficient, cost-effective FX trading platform," said Bill Moran, head of product for EBS.
