At a time when functionality and not liquidity is a key issue in the buy side’s choice of a portal, Currenex has thrown down the gauntlet to its competitors by launching its money market loans and deposits module. This product launch leaves FXall as the only FX portal supporting a single asset class. At the same time, Currenex has unveiled its first two auto-quoting FX banks in JP Morgan and Dresdner Kleinwort Wasserstein (DKW), as it attempts to rival FXall in the vanilla amount, auto-quoting space.
The new money markets (MM) module is fully integrated into Currenex’s main platform, and has an identical look and feel to the FX module. Lori Mirek, president and CEO of Currenex, says the company opted for loans and deposits based on customer and bank feedback. “It was a logical extension aimed at enhancing our customers’ ability to manage their short term cash requirements.”
The new module went live at the beginning of July. Thus far, Mirek reveals, the majority of transactions have been in the short dates, predominantly one week and under. The module can support deals up to 12 months. One of the early adopters on the MM product has been Buhrmann. Rudi Merckx, treasurer of Buhrmann Europcenter, says, “[We] have found that it saves time and improves auditability. We have a more extensive range of prices for both foreign exchange and loans and deposits to conduct our financial operations and risk management.
“We have seen a 30% improvement in efficiency in the first week,” Merckx continues, “Loans and deposits adds to the already comprehensive platform that Currenex provides, allowing us to consolidate more of our trading activities.”
The trading mechanisms are also very similar to the FX module in both look and feel. Customers can request a quote or leave orders with their banks and select certain banks from their relationship list. Mirek adds that as Currenex has intended with all of their product releases, the new module reflects market conventions. Customers can trade out of today, tomorrow or spot, the system has broken date capabilities, and interest can be calculated on either a 360 or 365 day basis. She adds the system has been built to be intuitive, for example, for those customers trading in sterling, the system defaults to a 365 day basis.
From the bank perspective, the trader claims the deal, prices it, and can at any time cancel the quote. Any deal executed is referred back to the bank for final credit check. Mirek says Currenex is happy to work with all of its partner banks to support the latter’s choice of credit checking environment. Currently it is a manual process, however she sees no technological problems pushing this process online.
The STP capabilities of Currenex’s FX module are integrated into the new module, so Mirek suggests that the company is now offering “STP squared”, adding that this is a benefit of the initial building process. “We have always built our architecture to support multiple asset classes, and that includes the level of STP efficiencies. The new loans and deposits module has all the MIS capabilities of the FX, clients can manage their cashflow by amongst other things, currency and value date, across both FX and money markets.”
Mirek suggests this latest move by Currenex is a significant development in that the new module is fully integrated into the platform. This is not the case with their competitors, she notes.
“Our buy side clients have been telling us since we started business that they want to deal with all of their banking relationships, on one platform, across multiple asset classes. Single proprietary systems do not satisfy these demands, therefore I think we have taken a very significant step towards meeting those needs,” she says.
Mirek acknowledges that the timing of this new release has benefits for Currenex, as it is the first major development by a multibank portal since the demise of Atriax. The major liquidity providers are on the high profile platforms which means, she suggests, that the choice for the clients is now about value added services and functionality. “We have also taken a major step forward in providing these,” she adds. “We have always led in innovation, we want to extend that lead using our technical core competencies.
“The rate of innovation is important to the market,” she continues, “We are accelerating our development and are being rewarded with greater and greater customer migration. We now have over 1,900 connected users on the platform, which I believe reflects our innovation efforts.”
The surge in connected users over recent months reflects, according to Mirek, issues such as the closure of Atriax, Currenex’s new liquidity providers, and the extended product range.
When questioned about future developments, Mirek stands behind the predictable response of listening and reacting to client needs. She does acknowledge that a natural move for Currenex could be to provide derivative capabilities to support the FX and MM modules, but also suggests that Currenex has other asset class capabilities, “on deck”.
Playing Catch Up
The one area of innovation in which Currenex has lagged somewhat, is in auto-pricing. The company has taken its first step to redress this by connecting to the auto-quoting engines of JP Morgan and DKW. JP Morgan became the first bank in mid-June. Mirek adds that she expects 12 more banks to be auto-pricing by the end of August, including all of the platform’s biggest liquidity providers.
Adam Burke, global head of FX e-commerce at JP Morgan, says, “JP Morgan is committed to driving the evolution of foreign exchange and to creating a more efficient market for our clients. Our collaboration with Currenex continues this process by enabling our mutual clients to execute their trades in the fastest and most effective manner. The speed with which JP Morgan and Currenex have been able to deliver fully automated pricing is a testament to the professionalism of both teams, and Currenex’s high level of responsiveness to their clients’ needs.”
JP Morgan became a liquidity provider on the Currenex platform in the immediate aftermath of the closure of Atriax in March. It has been trading with clients over the portal since then, using non-automated pricing mechanisms.
Mirek welcomes the development and says, “Our integration strategy is driven by our clients’ requirements, and integration with a leading bank liquidity provider like JP Morgan ensures our clients increased speed of execution.”
Whilst acknowledging the benefits auto-pricing brings to some clients, she is keen to stress that it remains just one pricing option available on Currenex. “It is not only about the small size trades,” she explains, “We also see many big ticket deals over the system, and transactions of that type cannot realistically be auto-priced. Similarly our customers like the fact they can leave orders on the system, in an auto-quoting-only environment this is not feasible.”