Deutsche Bank AG has agreed to serve as the settlement agent for ITFex Ltd., a start-up company that is developing an online international trade finance exchange.
The German banking company will facilitate settlements and execute transfers between members of ITFex's namesake Web marketplace, which is to slated to become fully operational by the end of April.
"We are always looking for new growth paths - this relationship is definitely one," said James McDonough, vice president and product manager for escrow services at Frankfurt-based Deutsche Bank, which has a "fee relationship" with the New York company that he would not detail.
ITFex (for international financial exchange) will enable banks to bid on trades and give investors insight on all aspects of a trade, including the prices of ensuing sales.
"We are attempting to create liquidity and to change the way trade finance is executed," said Hernando Perez, president of ITFex. "It has not changed for the last 25 years. There is a club group of investors."
The company will target "new investors who were not able to invest before because of a lack of liquidity and transparency," he said. Membership on the exchange will cost $5,000 a year, a fee that does not include custody charges and transaction fees.
Mr. Perez said that 230 qualified institutions have expressed interest in joining the exchange, including large financial institutions, trade companies, and telecommunications providers. The company expects to become profitable within a year, Mr. Perez said, adding that he hopes to sign at least three to four deals a week.
Robert Iati, a senior research analyst at TowerGroup in Needham, Mass., said the backing of an institution like Deutsche Bank is not to be overlooked. "Deutsche Bank has made a strong effort to get involved in alternative trading systems," he said. "They are not going to get involved with just anyone."
But Aaron McPherson, a research manager at International Data Corp. in Framingham, Mass., questioned ITFex's ability to bring in actual transactors, as opposed to shoppers using the Web site to make price comparisons.
"It works in theory," Mr. McPherson said. "But people do not like change. One of the problems with an e-marketplace is that you can't just switch everything at once. People will still do things the old way and learn the new way."