If you wondered whether FX (foreign exchange trading) is an area of hot investment in financial technology, this should make it clear. In just the last four weeks, no less than six new FX trading platforms have been announced. All these new launches are focused on aggregating liquidity from multiple single dealer platforms (liquidity providers) in an effort to provide more transparency in this very fragmented market. Funny thing is, while they're all trying to simplify market access and aggregate liquidity, the sheer volume of new platforms adds a new layer of complexity to the global FX market structure. It will be interesting to see how the market continues to evolve over the next few months.
Here is a summary of launches announced in the last four weeks.June 19: FastMatchFX
FastMatchFX is scheduled to launch July 1st backed by technology from Credit Suisse in partnership with FXCM. FastMatch is a new Electronic Communication Network (ECN) for FX that claims to offer large pools of diversified liquidity at unparalleled speed with complete transparency in the optimal location. It is targeting a diverse set of clients including retail brokers, institutions, banks, hedge funds, and proprietary trading firms. It's based on the Credit Suisse Crossfinder matching engine, which has been modified to handle the unique needs of FX trading. FastMatch will create transparency by disseminating platform's quotes and trades with sizes and prices in real time. It executes on a strict Price/Size/Time priority. It's hosted in Equinix NY4. In addition, on June 18, FXCM announced that it is acquiring a 50% controlling stake in Lucid Markets, a UK based electronic market maker in currencies.June 18: JFX.com
JFX.com was launched by Jiffix Markets, a team of former directors from Synthesis Bank in Geneva. The platform is targeted to private and professional investors and is designed by former foreign exchange traders. Jiffix says it provides pricing from nine Tier 1 banks, including BNP Paribas, CITI, Deutsche Bank, Bank of America, JP Morgan, Morgan Stanley, Royal Bank of Scotland, Barclays Bank, and HSBC. JFX claims that its advantage is providing aggregated prices from nine liquidity providers where many of its competitors provide only a single pricing reference. The company is based in Cyprus and has a European license.June 12: MoltenMarkets
MoltenMarkets is an independent company based on First Derivatives' platform using Kx Systems kdb+. MoltenMarkets is an FX ECN focused on attracting the high frequency trading community. They're offering high speed round trip execution and complete transparency. They appear to be targeting the HFTs, hedge funds, and active traders. They also offer a pre-trade system for long-only asset managers and large hedge funds as well as a custody offering to serve asset managers and investment funds. MoltenMarkets claims to offer a "range of innovative FX trading products that utilize the very latest technology, bringing true transparency of pricing while ensuring provable best execution for every trade."May 30: TraFXPure
TraFXPure was launched by interdealer broker Tradition, Ltd in partnership with Barclays, BNP Paribas, Deutsche Bank, Royal Bank of Canada and UBS. This ECN appears to be targeted at the interbank market and seems to be designed specifically as an alternative to the existing primary markets. It offers spot currencies cleared by CLS and is available to any participant who can settle via CLS. The company claims that execution logic and uniform and transparent pricing ensures fair execution for all. It offers transparency by fully disclosing counterparties post-trade. Initially, this was seen as a platform where banks could participate without interference from high frequency traders. But Tradition claims that the system will allow algorithmic traders to participate, but will not permit the disruptions seen on other platforms. This system seems to be another attempt to launch PureFX, which was announced two years ago but never went live.May 30: LiquidityFX
LiquidityFX was launched by smartTrade Technologies. This is a packaged FX aggregation and smart routing system targeted at tier 2 banks that want to expand their FX dealing business. LiquidityFX provides connectors to 25+ ECNs and single dealer platforms, aggregates the liquidity and provides sophisticated smart order routing functionality. It is being sold as a packaged system that banks can host in their own environment or as a hosted platform located close to the FX markets in Equinix NY2. It will soon launch in London and Tokyo.May 16: FX SpotStream
FX SpotStream was launched as a bilateral trading solution supported by Bank of America Merrill Lynch, Citi, Commerzbank, Goldman Sachs, HSBC and JP Morgan; using technology provided by smartTrade Technologies. This service has a very different model. It provides connectivity to multiple liquidity providers and displays their pricing to clients through a single API. It allows clients to choose their liquidity provider and route directed orders through a single connection. Participating clients must have a direct relationship with one or more desired liquidity providers. FX SpotStream is hosted in Equinix NY2 and London, and will soon open in Tokyo. It does not charge a brokerage fee for the service.Stay tuned…
In the coming weeks, we'll aggregate a list of all the single bank platform launches and technology refreshes. Big banks are investing very heavily in their FX infrastructure. In addition, we'll report on all the TCA products being launched to help the buyside get a better handle on this very opaque asset class.