- About the interbank FOREX market
- The First ECN Forex Brokerage Firm
- Electronic Broking Service (EBS) anonymous dealing systems
- What is Currenex?
- What is Atriax
- What is FXall?
- There are many ECN brokers in the world
About the interbank FOREX market
Some novice traders often ask the following question.
Is there a FOREX currency exchange and do we transfer the clients’ money there?
As such, the global FOREX currency exchange with common rules of trade and services does not exist.
On the exchange it is possible to trade currencies only in the form of a futures contract, or in the form of contracts on local exchanges of individual countries, with the possibility to get there the actual delivery of currencies by importers or exporters.
There is an interbank FOREX market, where the world’s largest banks, i.e. the market makers of this market, buy and sell to each other real volumes of currencies, which then are transferred to the accounts of manufacturing companies around the world.
Purchase and sale is conducted through specialized inter-bank trading systems within which transactions are made based on actual delivery of currencies.
The largest of these systems are the Reuters Dealing and Electronic Broking Service (EBS).
The First ECN Forex Brokerage Firm
The first electronic brokerage system was Reuters Dealing.
This brokerage system was designed for the spot Forex market and was presented in 1992.
At that time it was a revolutionary breakthrough technology, as Reuters Dealing 2000-2 Spot gave an opportunity to obtain quotations of currencies in real time on a large number of currency pairs.
The next step in the development of technology was the launch in 1997 of the brokerage Reuters Dealing 2000-2 Forwards.
As the name implies, the feature of the system was the ability to enter into forward transactions.
And in early 2000 a new electronic brokerage system Reuters Dealing 3000 was announced.
Electronic Broking Service (EBS) anonymous dealing systems
Reuters Dealing system has a strong competitor – Electronic Broking Service (EBS), which is an automated system of currency dealing.
It was created by a consortium of several major banks that were members of e-commerce together with Quotron company, which specialized in research in the field of IT.
The project started in 1993.
To date, the EBS electronic brokerage system includes many world`s major banks, including such well-known institutions like Bank of America, Commerzbank, Barclays Capital, Lehman Brothers, UBS AG.
In addition, special place is held by the Japanese company Minex – a joint project of KDD and Dow Jones Telerate.
Electronic broker EBS provides a full range of dealing services to the interbank market.
And EBS Spot Dealing System is one of the leading anonymous dealing systems designed for trading in the Forex market.
To date, about 900 banks of the world use this system.
Besides, over the past decades, so-called ECN trading systems started to take off at a fast pace both on the exchanging and OTC markets.
The most famous and largest ECNs for currency trading are Currenex, Atriax and FX Alliance – FXall.
What is Currenex?
Currenex is the first independent and open ECN, which connects buyers and sellers of foreign currency around the world.
It was established in 1999 in California, and now has offices in Chicago, New York, London and Singapore.
Only entitled persons, who received membership of this exchange, can participate in the bidding through Currenex.
Banks, treasury departments of companies, managers of corporate finances, government agencies, international organizations and central banks can be members of Currenex.
Currently, the members of Currenex are such powerful corporations like Autodesk, Compaq, Ericsson, Intel Corporation, and about 40 global leading banks acting as market makers, including ABN Amro, Barclays Capital and Merrill Lynch.
Currenex provides bidders with a complete complex of electronic services, called Straight Through Processing (STP), which means full automation of the sales process – from the placement of the order by the client to its execution and performance of all settlements.
Currenex holds biddings around the clock in real time, providing their participants with instant access to the foreign exchange market with a daily turnover of over $ 1.5 trn.
What is Atriax
Atriax is one of the youngest of the world’s leading ECNs. It was established in the UK in June 2001 and headquarters in London.
In view of this, it is subject to the law of the United Kingdom of 1986 “On Financial Services”, and the exchange itself is under the supervision of the state body regulating financial services.
Atriax is an independent company, whose major shareholders are such corporations as Citibank, Deutsche Bank, JP Morgan and Reuters.
In contrast to Currenex, which can trade any currency of the world, Atriax trades 43 currencies.
Bidders may obtain quotations of the currency of interest to any other currency, traded on the exchange.
Spot foreign exchange transactions, forward transactions and swap transactions are conducted on Atriax.
ECN divides the bidders into price-makers, the participants determining prices on the market of foreign exchange and price takers, i.e. participants accepting the prices offered by the price-makers.
There are always around 60 price-makers on Atriax, including such powerful participants of foreign exchange markets as Citibank, Deutsche Bank and JPMorgan.
What is FXall?
FXall is an electronic organizer of trading on the foreign exchange market, which started its work in May of 2001 with the launch of a fully automated trading portal.
This exchange has several offices in New York, London, Tokyo and a representative office in Hong Kong.
Treasury departments of companies, managers of corporate finances, hedge funds, central banks and other institutional clients can make use of FXall services.
In order to trade at FXall, these organizations need to have an agreement with exchange members, i.e. with its market makers.
There are many ECN brokers in the world
In organized exchange markets ECN technologies have found even more wide application.
Those interested in the stock markets of the U.S.A. are familiar with the names ARCA, ATTN, BRUT, BTRD, INCA, INET, ISLD, REDI, SDOT, etc., through which the majority of stock market are being traded.
A number of Forex brokerage company is not a dealing centre and all positions of the clients are brought directly to ECN, where the counterparties of investors are the market makers of world-wide reputation, such as ABN Amro, Barclays Capital, Deutsche Bank and JPMorgan.