Forex giants head for the net

Web-based foreign exchange trading is set to grow

The three largest players in the global currency market are teaming up with Reuters to offer foreign-exchange services over the internet to major clients, according to a report in Monday's Wall Street Journal.

The report said US banks Chase Manhattan and Citigroup and Germany's Deutsche Bank were creating a new company together with the news and financial information provider.

The move is the latest and most significant sign that big players in currency markets are turning to the internet to answer their clients' demands for faster services at lower prices.

Chase, Citigroup and Deutsche Bank together have a market share in world foreign exchange trading of almost 30%.

Other partners sought

The Wall Street Journal reported sources familiar with the deal as saying that the four founders were now seeking to include a further 50 or 60 international banks in the venture before publicly announcing its creation.

The new venture is set to compete directly with FX Alliance, an internet-based currency venture recently established by 13 other major international banks.

Top five firms for foreign exchange trading by market share

Deutsche Bank
12.53%

Chase Manhattan Bank
8.26%

Citigroup
8.07%

UBS Warburg
5.02%

HSBC
4.55%

Source: Euromoney

They include Credit Suisse First Boston, Goldman, Sachs Group, HSBC Holdings, JP Morgan, Morgan Stanley Dean Witter and UBS Warburg - all of whom are among the world's top 10 foreign exchange traders.

"There is room for two companies - EBS and Reuters - on the interbank matching system so I don't see why there might not be room for two here," said one banker in London.

"They could end up specialising in different things but if they don't differentiate themselves like this, it will come down to prices. In the short term, Citi, Deutsche, and Chase could be very aggressive on the pricing."

One-stop shop

Both services aim to offer their customers - expected to be mainly multinational corporations, institutional investors and hedge funds - a one-stop shop for currency services.

These would include spot, or regular, trades, more sophisticated financial instruments such as options and forwards and research and analytical modelling tools.

Clients would have 24-hour access to the global foreign exchange market, in which transactions worth a total of about $1,500bn are conducted each day.

The Wall Street Journal said the four companies planned to launch the new venture in early 2001 and have it fully operational by the third quarter of next year.

Citigroup and Reuters declined to comment on the report. Deutsche Bank and Chase Manhattan were unavailable to comment.