ICor Brokerage, the New York-based electronic derivatives broker, plans to debut its online trading platform in the second quarter of this year, according to officials. Tom Binks, head of ICor’s international operations, says the company is now in the final stages of testing and debugging its software. It is also negotiating with some 40 banks as possible users of the brokerage service. ICor will initially focus on forex options, but plans to expand into interest rate swaps, interest rate options and equity derivatives.
A precise date for ICor’s launch hasn’t yet been fixed, says Binks, but the broker plans to go live in the second quarter. The focus is on starting off with enough market makers and price takers to ensure liquidity. As with a traditional voice broker, ICor’s revenues will come solely through brokerage fees. The broker will also focus purely on the interbank market, he adds: “We’re friends of the traders, not competitors.”
The initial service covers plain vanilla options on major currencies, as well as a few commonly traded exotics such as barriers. However, Binks notes that ICor’s strategy is to position itself as a multi-product broker. Interest rate derivatives are next in line to be launched, he says, followed by equity derivatives. Forex options were chosen as the first product because of their relative simplicity and liquidity, he adds.
The ICor platform was designed by ICor and IBM. It is coded in Java and runs over a private network. Binks says the system’s interface design is focused on simplicity and ease-of-use:”It is very straightforward, but more detailed information is available if you go looking for it. If the system is too complex, you put people off.”
The platform’s functionality allows users to enter bids/offers (either executable or indicative), hit other users’ bids/offers, examine market depth and send out requests for prices. All bids and offers are anonymous. The system also features a “market action grid” summarising recent trading activity in graphical form, text-based conversational facilities, as well as a basic real-time credit-checking module that tracks interbank credit lines and displays quotes in different colours depending on credit status.
ICor recently signed an agreement with Numerix for its Numerix FI Trader application for structuring, pricing and quantifying risk on complex fixed income, interest rate or exotic derivative structures. Numerix is also an investor in ICor.
ICor was founded in 1999 by Jeffery Larsen, former head of international capital markets at Chase Manhattan, and Neil Chriss, a former vice president at Goldman Sachs Investment Management’s quantitative strategies group. Binks was previously deputy head of global derivatives at Bank of America. The company is financed with
venture capital and private investment, in contrast to competing bank-owned entities such as Volbroker.
Global insurance broker and risk management services firm, Arthur J. Gallagher, recently made an investment in ICor through its subsidiary, AJG Financial Services.
Binks is confident that ICor can see off the competition, despite the broker’s relative newcomer status. Volbroker, which launched in August 2000, has the advantage of its bank-owned status, but Binks believes this is a “weakness as well as a strength”, since banks outside the consortium will create demand for an independently owned online broker.
Meanwhile, GFInet, a hybrid voice and online broker, is another interbank platform for FX options trading. The brokerage recently acquired FX option analytics soft-ware provider Fenics with an eye to creating a fully integrated online B2B platform for reviewing, pricing and execution of currency options early this year.
Binks believes there is room for more than one broker in the online market, just as Reuters Dealing 2000-2 and EBS have each found a niche as electronic spot FX brokers.