Barclays Capital, one of the world's largest foreign exchange banks, hopes to build business for its online trading portal by offering automated exchange tools to traders and correspondents.
Ivan Ritossa, a managing director and the head of foreign exchange at the investment banking division of Barclays PLC, said last week that the British company has begun offering an algorithmic trading tool to corporate clients, money managers, hedge funds, and others that trade currencies over Barclays Automated Realtime Execution portal, known as Barx.
The tool, PowerFill, is based on the same technology that Barclays uses to manage hedging risk for its own foreign exchange trading operation, he said. "We're the first bank to come out with this algorithmic trading functionality in FX."
PowerFill shows a graphical bar on the user's computer screen that illustrates how quickly the market is absorbing an order. The tool is designed to let users execute a single large transaction, if the market can handle it, or break it into smaller ones to execute over time, he said.
Barclays announced the tool's development late last month.
Mr. Ritossa said his company plans to offer PowerFill to its global network of correspondent banks, so they can offer Barclays foreign exchange to their clients. Last month Barclays said it would offer a white-label version of the online trading service to correspondent banks around the world through an agreement with Integral Development Corp., a Mountain View, Calif., provider of hosting for other foreign exchange banks' white-label offerings, including one by Citigroup Inc.
The offerings are a response to the move by currency traders toward online execution. At the beginning of the decade most foreign exchange trading was done by telephone, but MasterCard International's TowerGroup estimates that nearly 40% of spot trading now is being done online, and that 44% will be electronic by next year. Last week TowerGroup projected that average daily trading volumes will exceed $3 trillion by next year, versus $1.77 trillion in 2004.
Tom Price, a senior analyst in the securities and capital markets research service at TowerGroup, said single-bank portals such as Barclays' are likely to face increasing competition from multibank portals such as FXAll and State Street Corp.'s FX Connect.
However, both single-bank and multibank portals are likely to come under pressure from electronic communication networks, which are emerging as full-fledged currency exchanges.
"Only the big guys are going to survive," he said. For single-bank portals such as Barclays', "price is not as important as the overall relationship and the depth of offerings in different asset classes."
