GFInet is preparing up to launch the first phase of its new FX options broking service this month. The broker will roll out software to all its customers that enables them to view live option prices on screen. Trade execution will still be performed over the telephone, say GFInet officials, though automated trading facilities will be added to the software in the third quarter of this year. This phased introduction is part of GFInet’s “hybrid broker” strategy of combining voice and Internet broking services in order to smooth the transition between the two mediums.
James Martin, GFInet’s product manager for FX options, says the service will concentrate on vanilla currency options. The broker classifies these options as “standard” and “specific”, he adds, the specific options being those with unusual exercise dates or strikes. The first phase of the roll-out, due to be completed by the end of this month, will allow GFI customers to view prices in real time on both standard and specific options. “They will be seeing the broker’s board for the first time,” he says. Customers will also gain online access to price histories and execution logs.
The software will be delivered in the form of a Java applet operating over a virtual private network. This effectively means using Internet-based technologies but avoiding the public Internet, says Martin. The broker opted for this technology combination because it is more secure and reliable, he adds.
Looking forward, GFInet plans to introduce automated execution for standard options in the third quarter of this year. Prices displayed by the system will be colour-coded as either live or “subject to market conditions” depending on the volatility of the underlying, says Martin.
The next development phase will involve adding straight-through processing functionality to the software by integrating it with banks’ risk management and position keeping systems. This will involve using Fenics as a gateway between bank systems and the broking network. GFInet acquired Fenics late last year (see Profit & Loss, December 2000/January 2001).
The FX options development is one strand of GFInet’s overall hybrid brokerage service that combines voice and online trading in a variety of products, adds Martin. The company is already trading European repos, German and UK electricity and certain equity derivatives using this model.