ICAP Creates New eFix Matching Product from Synergy Between EBS and ICAP Voice-Brokers

Some of the perceived advantages of the service will include combined benefits from each side, to create "unprecedented" liquidity, among

icap-logoToday, London-headquartered ICAP Plc has announced that its EBS division, operating the electronic FX business, has partnered with ICAP Global Broking, its voice-broking division, to launch a newly named eFix Matching product- as an electronic Foreign Exchange Fix service for clients.

Following reports from the Wall Street Journal yesterday that hinted at this upcoming release from ICAP, Forex Magnates investigated the development and contacted an ICAP company spokesperson for comments yesterday afternoon. The new eFix Matching service will be available in the coming weeks on the EBS Workstation and through EBS Ai, according to the announcement.

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“Potential to become the deepest source of liquidity for Fix execution”

Quoted in the official press release, Nichola Hunter, Co-head of EBS Market said, “eFix Matching fulfils a market need for increased transparency and auditability around Fix execution. We are very excited to be working with the ICAP voice teams to deliver a differentiated product that has the potential to become the deepest source of liquidity for Fix execution in the FX market. ICAP voice broking teams have a wealth of experience and knowledge together with a willingness to work in tandem with the new and developing electronic environment of eFix Matching. This project will allow ICAP collectively to further meet the demands of our customer base around the various daily fixings.”

The new service was described as providing ICAP voice brokers the ability to leverage EBS technology to identify Fix interest and facilitate Fix matching, according to the release. The eFix Matching will utilise ICAP’s global network and customer relationships as well as EBS’s technology and distribution to create an electronic central pool of fix liquidity , and this was aimed at delivering improved matching capabilities for the most frequently used daily Fixes.

Voice-Broking Synergy with Electronic for best Fix

Research was recently conducted with estimates determined for the share of the market’s trading volumes that are attributable to voice-broking, for Foreign Exchange. A look at the most recent triennial survey of central banks by the Bank for International Settlements (BIS) which was revised last December using volume data from April 2013, showed the following findings as seen in table 26 below, excerpted from that BIS report:

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Execution Methods for Foreign Exchange Instruments [Source: BIS 2013 triennial survey]
Execution Methods for Foreign Exchange Instruments [Source: BIS 2013 triennial survey]
The above graph shows the importance of voice-broking across FX instruments, and alongside the Electronic market which also commands a significant portion of global volumes, thus the effort from ICAP to create the synergy between both sides could be advantageous.

Simon Bond, Managing Director of ICAP Global Broking, said in the official press release regarding the synergy,”ICAP’s global voice expertise together with EBS’s electronic reach will allow customers access to unprecedented liquidity in the new electronic eFix Matching pool. Our customers’ requirements over the various daily fixings remain of paramount importance both to ICAP Global Broking and to EBS, and we see eFix Matching as an important part of our future business.”

ICAPs expected benefits of eFix Matching included:

  • Ticket processing options designed to satisfy compliance requirements
  • Fully electronic, auditable Fix order execution
  • First In First Out (FIFO) matching logic
  • Immediate notification of execution and position management
  • Cost-effective access to an anonymous, central pool of Fix liquidity
  • Increased Fix order execution opportunities through unprecedented access to counterparties originating from ICAP Global Broking relationships and EBS’s extensive distribution capabilities

The news follows ICAP’s announcement of Wendy Phillis to the Role of Group Chief Risk Officer, a position set to become effective on April 14th 2014, and most recently follows ICAP’s reported trading metrics for March – indicating an increase of 9% month-over-month– which were announced on April 4th 2014. Shares of ICAP on the London Stock Exchange pierced through the 400 pence mark again, and have recovered from the YTD low near 376 pence reached earlier this month, thus valuing the firms market-capitalization around 2.6 billion GBP using today’s prices which were up 2.25% around time of publication.

Will Wave of New Products or Processes Follow Fixing Allegations?

The process of fixing rates has come under the microscope as a number of complaints filed against major forex dealers alleged how rates were being manipulated at the expense of market participants, using for example the WM/Reuters 4pm fixing as a basis for the allegations. Those complaints, which have joined in a class-action status, had followed after a several regulatory agencies began investigating forex dealers over possible rate manipulation after Switzerland’s’ FINMA first made the announcement.

UK lawmaker’s said the global regulatory cooperation was being facilitate on the basis of an IOSCO Multilateral Memorandum of Understanding (MMoU) which allows cross-border sharing of information among regulators. And following these developments a wave of new products and processes may follow as firms best try to improve the process that such transactions are carried out. Our research indicates some senior industry executive believes the solution to bring more integrity to the FX markets is for firms to self-regulate, rather than wait for potentially draconian measures to come from regulators who could get stifled by lawmakers and left with no choice but to implement measures that could be bad for business.

Forex Magnates covered both of these subjects including firms self-regulating in wake of the ongoing Forex probes, and the IOSCO MMoU which is helping to foster the global regulatory cooperation, in our upcoming Quarterly Industry Report (QIR) for Q1 2014.

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