A true exchange for forex

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A true exchange for forex

Last year it was equities. Last winter it was bonds. Now this summer foreign exchange, by far the largest market, finally embraces e-commerce. Single-dealer platforms will still be needed, but might only account for 25% of the volume. The seven-bank consortium behind FXall.com has grabbed all the headlines this month, but it is already a year or more behind two independent ventures, and years behind State Street’s FX Connect, which since April has allowed other dealers on to the system. Why has it taken so long for forex bankers to accept the multi-bank approach, and what are the consequences of leaving it this late? Antony Currie investigates

Josh Levy never intended to be part of an uprising. He left his job as a currency trader at Goldman Sachs early last year to join Valhalla Forex, based just a few minutes' walk from his former employer, on the 15th floor of a building on downtown Broadway in New York.


The grandeur of its Wagnerian name belies its size: it is a small organization, specializing in proprietary trading in the forex spot markets, although it also dabbles in forwards.


Within weeks he had become exasperated with his dealers and market-makers. "We had good price discovery brokers so we knew within three pips where the price was," says Levy. "But the bid-ask quotes we were getting from the dealers were often quite far off the fair-market value. If the price was really 90-93 sometimes, especially in fast markets, we'd get prices which were four or five pips off the market, sometimes more."


Having worked at a broker-dealer, he ought, one might think, to have been better prepared.


For a start, Levy does not include Goldman in the group which so frustrated him. "I've been on the other side, but I also didn't think things should be as bad as they are.





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