By Jenny Strasburg and Chiara Albanese
Brokerage giant ICAP PLC is seeking to transform its
London-based foreign-exchange voice brokers into active promoters
of its electronic-trading platform, the latest move by a financial
firm to cut humans out of direct roles in buying and selling
currencies.
ICAP plans to detail to customers as soon as this week a planned
rollout of new technology, packaged under the name EBS eFix, aimed
at enticing banks and other institutions to channel more of their
currency trades to ICAP's electronic EBS Market, according to
officials at the firm.
ICAP wants its clients to see eFix as an alternative to the
major so-called "fixes," the processes pegged to set times such as
4 p.m. in London, that establish global exchange-rate benchmarks
based on a flurry of transactions in a narrow window of time.
These benchmarks have come under scrutiny from regulators in the
U.K., U.S. and elsewhere that are probing whether traders sought to
manipulate rates by collusion or other means.
Bank and trading-firm executives say foreign-exchange volumes at
the fix have declined in recent months. "Volumes traded at the fix
have plummeted. Any trader at any bank is very scared. They don't
want their footprint to be on any trade executed at 4 p.m.," said a
senior trader at one of the top dealing banks.
With its latest move, ICAP is betting that by further pushing
the trend of currencies trading to electronic platforms, and away
from manual transactions, it can draw back some of the trading
volume its EBS platform has lost in recent years to banks" internal
foreign-exchange platforms and other trading venues. As the market
has shifted, EBS average daily volumes have declined from a peak of
more than $270 billion in September 2008, to around $90 billion
average daily volume, as reported in monthly figures this year.
ICAP executives say banks, asset managers and companies pivotal
to the $5.3-trillion-a-day global currencies market are a long way
from adopting a replacement for popular fixes, which many companies
and fund managers require to price assets, for example for index
funds.
In backing the eFix push, though, ICAP is asking its phone-based
currencies brokers to cut themselves largely out of directly
handling trades in one of the last bastions where they retain a
prominent foothold.
Instead of taking calls from banks and trying to physically
match their buy or sell order with other firms in the market, voice
brokers at ICAP, who earn commissions based on volumes of trades
they handle, will be asked to encourage customers to route their
foreign-exchange trades to EBS, where trades are generally cheaper
for clients to execute.
ICAP executives have been discussing how to adapt the
commission-based system to encourage the shift. The company doesn't
say how many brokers it has handling foreign-exchange trades. A
person familiar with the firm said ICAP has 20 so-called spot
currencies voice brokers in London, in addition to teams in Hong
Kong and New York and brokers focused on other types of
foreign-exchange trading.
ICAP's chief executive, Michael Spencer, has described the
company's financial-market middleman role as increasingly
electronic, though he has said voice brokers will continue to have
a place serving customers in markets for derivatives and other
over-the-counter trading.
Interdealer brokers and banks have turned increasingly to
electronic trading in currencies and other markets. More than 60%
of all trading in the global foreign-exchange market is done
electronically, and the number is climbing, according to a 2013
survey by consultancy Aite Group.
Write to Jenny Strasburg at jenny.strasburg@wsj.com and Chiara
Albanese at chiara.albanese@wsj.com
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