IS THERE GOING TO BE A NEW KID IN TOWN?

IS THERE GOING TO BE A NEW KID IN TOWN?
Yes, there is going to be a new kid; and by the time this book is published,
the name and place will be FXMarketSpace. This entity represents a collaborative
effort between two foreign currency industry leaders: Reuters
and the Chicago Mercantile Exchange (CME).
This venture is expected to launch in 2007. What it will do is facilitate
spot trading transactions on six major currencies against the U.S. dollar:
the euro, the Japanese yen, the British pound, the Australian dollar, the
Swiss franc, and the Canadian dollar. Four cross-currency pairs will also be
supported. FXMarketSpace intends to add more products in forwards and
options at a later date. Since the forex market has changed dramatically
over the past few years, many players, such as hedge funds and commodity
trading advisors who manage money, have entered the market with a new
set of needs, one of which is order anonymity.
This concept will be the first over-the-counter FX trading platform to
offer central counterparty clearing and full trade anonymity. FXMarket-
Space will also be accessible through multiple portals, giving its users
unprecedented breadth of access to its trading platform. These characteristics
are expected to increase participation and to enhance liquidity in
the forex market. FXMarketSpace combines the central counterparty
model and clearing function of the Chicago Mercantile Exchange with the
global distribution network and direct processing capability of Reuters. It
is supported by one of the best matching and clearing technology programs
and offers industry-leading matching-engine capabilities provided
by the CME.
14 FOREX CONQUERED
Who Is Reuters?
Reuters is the leading provider of news, financial information, and technology
solutions to institutions, businesses, and media worldwide. Founded in
1850, Reuters has always been committed to delivering information using
the best available technology. In 1992, Reuters pioneered electronic trading
services and established its presence with the launch of Reuters Dealing
(originally D-2001, now Dealing Direct), an electronic peer-to-peer trading
platform. Since then, the Reuters platform, in its formative and subsequent
versions, has provided a catalyst for forex trade-volume growth by significantly
reducing both execution speed and transaction costs.
FXMarketSpace
This venture will offer participants unprecedented choice of access to its
platform through a variety of means including CME’s i-Link API, Reuters
Dealing 3000 and Reuters 3000 X-tra desktops, Reuters standard transactions,
API Select Independent Software Vendors (ISVs), and portals of participating
clearing member firms. FXMarketSpace is targeted to meet the
explosive growth in demand for currency transactions by banks and other
financial institutions, including traditional asset managers, proprietary
trading firms, leveraged funds, currency managers, hedge funds, and commodity
trading advisers (CTAs). It is designed to provide increased price
transparency, to introduce trading anonymity, and to heighten forex market
accessibility. These three features will attract more players, which in turn
will increase market liquidity and market efficiency for the next generation
of forex traders. All market participants will be able to trade against the
same set of firm, executable prices. The central counterparty clearing
model provides for full anonymity and eliminates the need for bilateral
credit lines to support trading activities. The company’s matching host provides
increased transparency through both a five-level depth of book display
with bid/offer quantities and detailed “time and sales” information.
Firms may utilize the existing CME telecommunications hubs to facilitate
their connections to FXMarketSpace, providing improved speed of access
while reducing costs. Hubs are currently located in London, Amsterdam,
Dublin, Paris, Milan, Gibraltar, and Singapore. Customers may utilize either
their existing Reuters infrastructure or secure Internet connections to access
the market.
FXMarketSpace will reduce counterparty risk by being the buyer to
every seller and the seller to every buyer by employing CME clearinghouse
functionalities. If you bought this book to learn about the trading opportunities
in the forex arena or even if you are a seasoned trading pro, look to
The Business of Trading Money 15
learn some of my techniques. Keep your eyes and interest open on this new
venture for currency trading; it promises to revolutionize the way we trade.
It is like combining the best of futures and the spot forex market. Perhaps
as it develops the centralized marketplace, we will have access to spot
forex volume and will not need to worry about capturing that data from the
futures market.