The June announcement by seven leading banks to create FXall.com, stands to lay the groundwork for a new FX marketplace that brings together banks and customers on a single, electronic platform. The founding partners in FXall.com are Bank of America, Credit Suisse First Boston, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley Dean Witter and UBS Warburg.
The key to the system, says Phil Vasan, CSFB’s managing director and head of CSFBNext, is that it will be entirely inclusive of all market participants. Other banks will be offered the chance to take an initial ownership stake in FXall.com, while participation is open to all FX dealers.
“FXall is what clients have been asking for ‘ it’s a single point where clients can access prices, research and forecasts from any one of the banks that they have relationships with. It’s inclusive, not at all exclusive ‘ it’s intended for the entire FX marketplace, so it’s very inclusive in terms of banks’ providing liquidity and access to deal flow on the same terms,” he says.
Clients will have 24-hour “low cost access” to view and trade in spot, forwards and options across all tradable currencies. FXall will also provide online order entry, routing and monitoring, with complete straight-through processing (STP). The bank dealers will have direct online access to their clients; however, they will not be able to access the system to trade or view the research of other dealers.
The service is targeted at large multinational corporations, institutional clients, fund managers and hedge funds. Vasan says the FXall consortium believes client input will be key to development going forward, and therefore will shortly be setting up a client advisory service.
The technology is being developed both in-house and with outside vendors, which are currently being reviewed. FXall will undergo a phased rollout with the first deliverable due towards the end of this year.
The venture will be independently staffed and managed, with Philip Weisberg of LabMorgan, JP Morgan’s e-finance unit, acting as interim CEO, and Paul Kimball, co-head of global FX at Morgan Stanley Dean Witter, acting as chairman.
In addition to online prices, execution and research, FXall aims to establish industry-leading back office protocols as well, says Fabian Shey, UBS Warburg’s managing director and head of Global E-Commerce for Treasury Products. “FXall.com will allow clients for the first time, to achieve the full cost efficiencies of straight-through processing. This will provide two main benefits. First, it addresses clients’ calls for a multibank solution in which liquidity resides in one place. Second, it will enable us to establish standards and protocols (such as messaging formats, work flows, confirmation and settlement instructions) that help improve efficiency in trade processing from the front office through to the back office ‘ which is why STP is one of the permanent features of the service.”
In this environment, banks will still have to distinguish themselves in many of the same ways that they have traditionally. “Pricing is certainly one of the competitive elements of the site,” says Shey. “Banks will also compete on the merits and quality of research, execution, depth, global reach, brand name and credit, to name a few.”
But whether or not clients decide to move to this dealing environment remains to be seen. “Some customers may stick to the traditional methods and some will use it as a complementary service to the telephone, but we expect many clients to migrate to this marketplace,” adds Shey.
“The efficiencies provided to clients by FXall.com will enable faster and cheaper FX transactions, resulting in an even greater degree of liquidity and transparency across this global market. We believe that FXall.com will be the most powerful application yet of e-commerce to the FX industry world-wide,” says Kimball.