Despite the impression that multi-bank foreign exchange platforms are killing off single-dealer sites, a research study by Greenwich Associations shows that single-bank sites are keeping up with the multi-bank platforms.
Among single-dealer platforms used by global financial institutions, UBS Warburg had 30 percent of online users, followed by Deutsche Bank and Goldman Sachs -- both of which had 15 percent.
This compares with FXall -- the leading multi-bank platform -- which had 20 percent of online users, followed by Reuters 3000 with 19 percent, FX Connect with 15 percent and Currenex with 5 percent. On the global corporate side, FXall gained substantially with a 27 percent share of online users as compared with Currenex's 11 percent.
Overall, 25 percent of the world's corporate and financial institutions are trading foreign-exchange products online, a 17 percent increase since the end of 2001, the study finds.
According to the head of one leading prime brokerage firm, his firm's buy-side customers participate in both multi-bank portals and single-bank sites. "Our clients are using a variety of single-bank platforms," says Joseph Buthorn, senior vice president, prime brokerage at AIG Trading Group Inc. A prime broker has a credit relationship with hedge funds and commodity trading advisors and provides a variety of operational services.
Without naming specific bank portals, Buthorn says AIG's clients are using portals operated by eight or nine of the top 10 banks in the world. "Top ten banks are represented among our client base," he says.However buy-side clients are also doing business on multi-bank platforms.
"I can tell you that Hotspot is clearly the largest," says Buthorn. "We also have some business over FXall and Currrenex," he adds.
AIG is one of five prime brokers participating in Hotspot Fxi -- the foreign-exchange electronic communications network (ECN) launched about a year ago for institutions. Bear Stearns is also a prime broker and market maker. In contrast to FXall and Currenex which are leaders in the request for quote (RFQ) model, Hotspot FXi shows live dealable prices," says John Elrey, president and CEO of Hotspot FXi.
"For someone who wants to manage their own execution risk and trade the spot market, a true ECN is the way to go." The ECN's main users are black-box hedge funds, model-driven hedge funds, CTAs, asset managers, active corporate treasurers and small banks.
However, Hotspot FXi was not mentioned in the Greenwich Associates study, which included a small number of hedge funds among the financial institutions, says a spokesman.
Conducted at the end of 2002, the study is based on interviews with treasurers, assistant treasurers, fund managers, buy side-traders and other financial professionals at the more than 2,700 corporate and financial institutions throughout Asia, Europe and the Americas. Each trade $250 million or more annually in foreign exchange. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio