According to Wall Street Journal the most powerful banks in the currency-trading business, moving to reclaim lost business, are preparing a banks-only dealing system that could shake up the market, several people familiar with the situation said.
The planned venture has the working title of Pure FX and backing from most of the 10 largest banks in global foreign-exchange dealing, whose daily spot volume of $1.5 trillion makes it by far the largest asset class.
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The banks are next week expected to start approaching technology firms about building a new dealing platform, two people familiar with the situation said.
It seems the banks will be looking to leave EBS and start their own trading venue hoping to lure hedge funds and algo traders – the highest growing market segment at this point. Last such attempt was in 2007 and was called FXMarketSpace, founded by Reuters and CME, and was shutdown less than two years since inception. I don’t believe that Pure FX, if it was to materialize, will somehow impact the retail fx market as retail traders will now be allowed into the interbanking feed for several reasons, one of them is relatively small deal size as opposed to massive interbanking deals. The thing in such venue however is that it will be very useful for high frequency traders and for clearing firms (including retail fx brokers). Additionally, it’ll create competition in a market completely controlled by ICAP until now.