Strong liquidity and the biggest names in foreign exchange trading are helping Atriax, the much-anticipated online foreign exchange portal that began operations Friday, attract customers.
The foreign exchange venture was formed in October by Chase Manhattan Corp. (now J.P. Morgan Chase & Co.), Citigroup Inc., and Deutsche Bank - the top three foreign exchange banking companies in the United States - along with Reuters Group PLC.
With liquidity from 67 banks, Atriax offers market data, news, research, and automated pricing and trading in 43 currencies - from the Mauritian rupee to the Moroccan dirham. Spot, outright forward, and swap dealing are available, and options trading is to be made available this month.
But for its customers, brand and liquidity seem to be stronger draws than functionality or features.
"The overwhelming reason for choosing Atriax was the fact that it's backed by three major liquidity providers in the foreign exchange market and, of course, Reuters," said Murray Gunn, currency investment director at Standard Life Assurance Co. in Edinburgh, the first company to make a trade on Atriax shortly after it opened for business.
"Our view is that there's a lot of capital, intellectual and monetary, invested by these players in Atriax, and they will have a very large reason for making it work," he said.
Dieter Musielak, head of financial markets at Siemens Financial Services of Munich, said it looked at three other foreign exchange portals before settling on Atriax. Liquidity was a "major concern" for Siemens, and it was the reason his company chose Atriax over independent portals, Mr. Musielak said.
Independent portals, like Currenex Inc., may have less secure financial backing because they were not formed by a consortium.
"We don't want to find ourselves in the position that there won't be any banks supplying us with liquidity," he said.
David B. Rusate, deputy treasurer of foreign exchange and commodities at General Electric Co., said it considered three portals but Atriax offered the strongest liquidity, as well as the best pricing and straight-through processing.
Atriax will create operating efficiencies for GE, and it will make trading "considerably" less expensive for the company, Mr. Rusate said. "They've really developed a state-of-the-art product that should continue to proliferate in the future."
Dan Morehead, chief executive offer of Atriax, said the portal differs from its competitors in several ways. For example, it lets member banks price currencies either manually or automatically, and customers can ask for quotes from any number of banks, while other portals limit the number of quotes, he said.
Unlike some other portals, Atriax lets its customers connect through the Internet or a dedicated phone line, Mr. Morehead said. Not all portals offer options, and in the future Atriax will offer the ability to trade from about 100 currencies, a number "that is unrivaled" in the industry, he said.
Atriax is the only portal that has publicly announced its pricing schedule, Mr. Morehead said. Its pricing is the same for everyone, but other portals give some customers special deals, he said.
However, "the principal difference between ourselves and most of our competitors is we are an open, neutral system, and we're allowing our members to determine how dealing protocols are developed," he said.
Atriax's launch has heated up the competition in Internet foreign exchange. Its two main competitors are FXall of New York, a 48-bank consortium started in May by seven banks, and Currenex of Palo Alto, Calif., which was started last year by a former America Online executive and has more than 40 bank members.
Other players include CFOWeb, FXAlliance, Gain Capital, State Street Corp.'s FX Connect, and Wells Fargo's Foreign Exchange Online. In May, SunGard announced that it was launching its STN Connect platform.
The online foreign exchange market is relatively new, but analysts already are predicting that the space will eventually be reduced to a few players.
Mr. Morehead agreed with that prediction, but he said that since only 5% of forex trading is currently done electronically, there is ample opportunity for portals to persuade customers to conduct more of their trading online and capture a share of the $1.5 trillion daily global market.
"The market opportunity is extremely large," he said. "Foreign exchange is by far the largest market in the world. However, I do think most users will select the strongest, most liquid system, and that will tend to pool liquidity into a small number of portals."
