City Index, the spread betting firm, has launched a new service under its City Markets label, which provides clients with bespoke margin FX trading facilities on the Web. The system to support the new operation has been provided by Dresdner Kleinwort Wasserstein (DKW), and is based on the latter’s Piranha platform.
DKW has provided the execution, position management and credit checking functionality, and takes all the market risk emanating from City Markets’ clients. Credit risk for the latter lies with City Index.
Alex Thistlethwayte, CEO of City Index, says that City Markets, “Is trying to provide a service akin to that in the wholesale markets; in effect provide investment bank services to smaller market players. We feel that there is a niche for a very competitive FX product that brings these services to the retail space.”
Clients targeted by the new Margin FX system include, says Thistlethwayte, FX professionals and smaller hedge funds. “To attract these clients,” he continues, “We have to be able to offer tight competitive pricing. The link up with DKW allows City Markets to provide much more competitive pricing than would be possible without the backing of such an experienced global FX trading team.”
Jon Simmonds, head of FX e-commerce at DKW, says, “Our ambition is to grow our overall business, from the largest clients to the smallest. The Piranha system is very robust, stable and mature. We have been looking at ways of extending its reach through exploring new and unique business models such as this. City Markets’ clients can now trade on streaming, stable prices, in much larger amounts, and because they are receiving a market spread, they can trade on an intraday basis.”
Because most of the business on the City Markets system will be under DKW’s auto-trading threshold, Simmonds explains, they are not going to suffer from being ‘read’ and the prices offered are less subject to change. In effect, he adds, DKW is becoming the hub of an exchange, and as the client base expands, this will create more opportunities for the bank.
The key element of the system for City Markets is, Simmonds continues, “The real time pre-trade credit checking functionality. This is what differentiates our offering. Aside from these risk management tools, clients using the system receive the benefit of straight-through processing, and the bank’s high messaging standards.”
Thistlethwayte agrees, “Obviously we have pre-trade credit checking in all our existing business areas, it was, therefore, crucial for DKW to provide a similar environment for our margined FX trading product. DKW’s tools provide this environment, and are a critical factor in making the trading process more efficient. Our association with DKW strengthens our brand and raises its credibility.”