According to two studies conducted in Europe and the US, up to two thirds of treasurers are not interested in online foreign exchange trading.
Of those that already are trading forex online, or intend to, most are likely to be in global or regional treasury centres where the volume and frequency of foreign exchange dealings and larger number of banking relationships make it, in theory, a convenient option.
When FX Week polled about 60 company treasurers at last month's UK Treasurers Conference in Birmingham, they found that only 15% of those businesses were trading currencies on the internet. The survey also showed that more than two-thirds are not considering online foreign exchange trading at this stage.
US-based research firm Greenwich Associates also found in a study conducted late last year that 13% of companies and financial institutions have been trading online, and an additional 29% planning to do so.
With FXall and Atriax both ramping up their operations right now and pitching their services to potential clients, the number of treasuries using online patforms will no doubt grow. But even treasurers who have become comfortable with online forex dealing have posed questions about the immediate benefits of an online multi-dealer system as opposed to the single-dealer platforms that have been provided by their bank.
"I'm still unsure about how the open multi-dealer platforms can meet all our needs. To compete they're going to have to address all the advantages that a single-dealer system already has," says Cyrill Scholer, vice-president at ABB Treasury Centre. “We are on the advisory board for Atriax working to get all the customer requirements in there. We're still continuing , though, to look at the single-dealer platforms, and have yet to see an open multi-dealer platform that would replace our current single-dealer application.”
Another concern is integration with existing treasury systems -- something that treasurers don't want to deal with themselves. There is also the question of how the relationship will work when things go wrong. If a treasury is dealing with one of its banks through a multi-dealer platform, they can't expect help from the bank and would have to rely on the platform provider for support.
For the job of integration, Scholer says this is something he wouldn't expect to have to pay any extra for. "I think it will be driven by the software providers. They create the interface that has to link to a multi-dealer platform's technology. So the banks and Atriax or FXall need to talk to with the software suppliers and provide them with the means to link up."
Eric Hoh, head of Swedish bank SEB’s Trading Station initiative, agrees. “They have started to connect to major treasury software providers. I think it's of great importance to them. On the other hand, I think treasury systems providers will charge a transaction fee for volumes going through their clients' systems, so I think it’s in their interest also.”
Major treasury service providers such as Trema have extended links from their software to one or more of the multi-dealer platforms, but another service provider, SunGard, has launched a rival platform called STN Treasury. The platform, aimed mainly at increasing straight through processing for SunGard treasury customers, runs over the SunGard Transaction Network (STN), an e-business network that connects SunGard's buy-side and sell-side clients.
FXall and Atriax are seen as the main rivals in online forex as they are both owned by a large consortia of banks. However, Hoh says that he doesn't expect much difference in their approach. "It's too early to say on functionality, but I really think that these organizations are so professional that they will provide the functionality that customers want. The differentiating factor will be the prices quoted within each platform and that comes from the banks backing it up with liquidity.”
Most treasury customers that are going online will use either one multi-dealer platform, such as Currenex, Atriax or FXall or one of these plus an existing single-dealer platform provided by their core bank
In this way it will be the treasury customers -- as well as institutional buy-side clients -- who decide through their criteria of speed, reliability and integration which one of the multi-dealer platforms the banks should be providing most support and liquidity for.
