In what promises to be a groundbreaking initiative, industry veterans are setting up an online exchange that will provide the setting for commission-based FX trading. The new service, Hotspot FX, is backed by one of the largest venture capitalists in Europe, the ETF Group, as well as by renowned currency speculator Joe Lewis, who reportedly amassed a personal fortune of more than $2.5 billion largely from trading in the FX markets. The service is due to enter demo trading shortly, and aims to launch in the fourth quarter.
Short Hills, New Jersey-based Hotspot FX is spearheaded by CEO David Ogg, who has enjoyed a long and fruitful career in the currency markets ‘ with senior FX trading posts at some of the world’s largest banks. During his 10 years with Credit Suisse as FX manager, Ogg was known as the biggest dollar/mark flow trader in the market. He later went on to head FX trading at Lehman Brothers, HSBC and Dresdner Kleinwort Benson.
Ogg says the service will function like an ECN (electronic communications network), but will have a “totally different look” to the current equity market ECNs. Hotspot FX, says Ogg, will be more inline with EBS, showing the best bid/offer rates that can be dealt on anonymously; however, his service will also show depth of book, so clients can see the amounts behind the orders.
“Our platform functions as an auction market that automatically matches buy and sell orders,” says Ogg. “All of our orders are matched in the order in which they are received, without regard to the identity of the client or size of the order.”
Clients will be able to trade, enter orders and monitor positions online, in the major spot currencies and crosses with forwards to follow shortly. The service is targeted at financial institutions, corporations, hedge funds, CTAs, asset managers and individual investors.
Hotspot FX, which will operate over a secure platform, already has its strategic liquidity providers in place, says Ogg. “Hotspot FX is neutral, efficient and fair ‘ it’s a first come, first serve system that makes depth of market visible for all,” he adds.
Ogg is joined by a number of other well-known forex faces ‘ Howard Silverman, who was most recently with DLJ International, and previously worked with Ogg at Credit Suisse, as well as spent time with First Boston and NatWest, will be head of sales.
Stephen Leibowitz joins with 15 years of IT development and risk management experience, and will be chief technology officer. Leibowitz was the driving force behind Salomon Brothers’ FX trading platform. Development will take place both in-house and with outside vendors, but Ogg says the front-end is being designed in-house to ensure the right look and feel for professional traders.
Dr Ken Bercuson joins as chief financial officer and head of research. Bercuson was most recently managing director and head of global FX strategy at DLJ. Prior to that, he was head of strategy for the SBC Currency Fund from late 1997 to April 1999. From July 1995 to November 1997, Bercuson was head of economic research for the Americas at SBC Warburg Dillon Read. He also spent 16 years with the International Monetary Fund, where he was the division chief for South East Asia and the Pacific.
On the trading side, Steve Reich joins from HSBC where he was chief dealer, along with Barry Calder, formerly chief dealer at Banque Nationale de Paris. Reich will also be involved in new product development. Additionally, Hans-Rudolf Kuchler, formerly CEO at UBS in New York from 1974-1987, joins the advisory board.
Ogg says Lewis, whose ownership comes through one of his wholly owned group of companies, will be taking an active role with clients.
The team currently numbers nine in total but will shortly reach 30 staff.
“As an ex flow trader, I know the value of each pip (or point) to the bottom line,” says Ogg. “Hotspot FX will give our clients the ability to keep as many of these pips for themselves as possible. We want to cut the fat out of the FX market. This is the system clients are asking for ‘ and we have already had commitments from a large number of clients to deal on our system.”
In addition to trading, the platform will carry research, charts, news, comprehensive integrated portfolio reports and daily short and long term strategies. The service will operate via the www.hotspotfx.com Web site on a 24-hour basis, from Sunday afternoon to Friday at 5:00 pm New York time.
Clients will trade on margin and be charged on a commission basis. All accounts are segregated and FDIC-backed.
While there are several similar online services available in the market, Ogg believes Hotspot FX will differ substantially from what is currently available, although the closest competitor is probably Matchbook FX. “This will be the most efficient, intuitive and functional trading platform ever built for FX,” he claims.