More Money, More Platforms: Profiling the E-Trading Vendors in the Cash Forex Markets

February 23, 2005


New York, NY, USA February 23, 2005


The electronic trading platforms in the inter-dealer cash forex market operate in an environment different from that of the dealer-to-client platforms. The inter-dealer market is well served by two strong platforms with complementary currency pair strengths, while the dealer-to-client market is more fractured, with five specialized platforms and one very recent entrant.

In a new report, , Celent examines in detail the interbank platforms, Reuters Dealing 3000 and EBS. The dealer-client platforms featured in this report are FXConnect, FXAll, Currenex, Hotspot FXi, and 360T. Newest entrants eSpeed and Lava FX are also featured. The single-dealer platforms will be the focus of a future Celent report. Celent predicts that all these platforms will become more liquid in the future as adoption of electronic trading continues to increase.

The report examines in detail the differences among these platforms in terms of intended customer base, pricing mechanisms (RFQ vs. executable streaming prices), anonymity, prime brokerage, pre- and post-trade support, revenue model, and ownership. Celent has also released An Overview of the Cash Foreign Exchange Markets, which examines the characteristics of the inter-dealer and dealer-to-client markets, including industry initiatives such as Continuous Linked Settlement. Each dealer-to-client platform (with the exception of FXAll) is targeting a specific type of customer within the buy-side, so there is not as much head-to-head competition as in other markets, such as equities.

The interbank trading platforms are a different story. While Reuters and EBS have strong positions with the bank community, there is little difference between the two platforms. It is not unimaginable that they could merge and combine their strengths in complementary currency pairs, although it is unlikely in the short term. Further, the interbank market is becoming a more bifurcated one in which the large banks contribute price discovery and liquidity to the electronic platforms, and the small banks act like buy-side customers in the dealer-client platforms, removing liquidity but only nominally providing it. As this market becomes increasingly segmented, new platforms will be launched to cater to banks outside of the top 100.

Jodi Burns, senior analyst in Celent痴 Securities & Investments group and author of the report, says, "Because the dealer-to-client platforms have each specialized in some way, either by customer base or STP services, the market is large enough, and growing fast enough, to sustain these platforms. We do not predict any consolidation among these platforms. In the inter-dealer market, competition for the smaller banks may create some consolidation or even the closure of some platforms."

The 44-page report contains 14 figures and two tables. A table of contents is available online.

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


New York, NY, USA February 23, 2005


Return to report Abstract


Executive Summary 3
Cash Forex Market Overview 6
Inter-Dealer Market Characteristics 7
Inter-Dealer Trading Platforms 8
Reuters Dealing 3000 8
Electronic Broking Service 9
Dealer-To-Client Market Characteristics 13
Dealer-To-Client Trading Platforms 15
Single-Dealer Platforms 15
Multi-Dealer Platforms 16
FX Connect 17
FXAll 22
Hotspot FXi 27
360 T 30
New Entrants 36
eSpeed 36
Lava FX 38
Looking Forward 41



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