Dealers blast multi-bank FX portals

The future looks bleak for the remaining multi-bank foreign exchange trading portals, according to delegates at the sixth annual ACI European Congress in Luxembourg last week.

Following the closure of two of five portals in the past six weeks – technology firm SunGard’s system and Atriax – 90% of delegates surveyed by RiskNews' sister publication FX Week in a straw poll said they now believe multi-bank forex portals have had their day.

Many of those pointed to the move towards the provision of straight-through processing (STP) instead of tight pricing as one reason for their cynical outlook.

As forex price transparency has become greater, argued one e-FX official at the event, corporate treasurers and fund managers no longer need to request multiple quotes. “Instead, they can use one of the highly successful single-bank platforms out there,” he said.

Delegates pointed to the perceived cost of setting up and running forex portals as a primary cause for their pessimism. “The business model doesn’t work,” said one delegate at the ACI event, who works in the online forex industry in London. “It’s just too expensive.”

The banks that owned Atriax – Citigroup, Deutsche Bank and JP Morgan Chase – reportedly ploughed up to $50 million apiece into the failed enterprise, and it was their refusal to supply further funding that finally grounded the platform last month.

But it was also the huge investment costs poured into some of the remaining platforms – FXall, owned by 17 global banks, Currenex and State Street’s FXConnect – that the multi-bank bulls gave as their foremost reason for believing multi-bank portals will persist.

“The portals will continue,” said an e-FX official attending the congress. “It’s inevitable because of the investment and technology that is in place.”

A senior official at one of the banking owners of FXall pointed out: “FXall has 17 equity owners. If we’re all asked to put in another $10 million, we can. Atriax failed because it only had three banks to go to.”