FXall.com, a foreign exchange service announced Tuesday by seven of world's largest financial institutions, is an alliance of dealers who want to keep third-party consolidators from cutting into their business, observers said.
FXall.com's founders are Bank of America Corp., Credit Suisse First Boston, Goldman Sachs & Co., HSBC Bank, J.P. Morgan & Co., Morgan Stanley Dean Witter, and UBS Warburg.
Officials said the service, which is expected to become operational this year, would offer 24-hour access to the global foreign exchange market, which is worth $1.4 trillion a day. FXall.com would give clients such as corporate treasurers and fund managers access to low-cost foreign exchange services from participating banks. Customers would access the network and trade with participating dealers, compare bank rates, obtain the bank's market research and other information, and then choose the best deal entirely through a single point of access.
In a statement, Paul Kimball, chairman of FXall.com and co-chief of foreign exchange at Morgan Stanley Dean Witter, said, "FXall.com will enable faster and cheaper FX transactions, resulting in an even greater degree of liquidity and transparency across this global market."
A banker from a large bank with a big foreign exchange business said, "They are in effect creating their own third-party aggregation service." He asked that his name not be used because he did not want to talk about a competitor. His company is not involved with FXall.com. "It is a competitive response to the threat of price aggregation," he said.
"It is no secret that everyone is talking to everyone else in this business about these sorts of initiatives," the banker went on. "One would be naïve to assume that the leaders are not contemplating some sort of a similar or a competitive response."
The largest three banks in foreign exchange are Deutsche Bank, Chase Manhattan Corp., and Citigroup Inc., with about 30% of the market, the banker said.
In April, a similar service was formed called Currenex Inc., a Menlo Park, Calif.-based foreign currency trading service that has received $22 million in venture capital financing.
Philip Weisberg, an executive of LabMorgan, J.P. Morgan's e-finance unit, and interim CEO of FXall.com, said the service would be a for-profit venture that would operate independently of its founding banks.
Mr. Weisberg said the founding banks formed Fxall.com because "our clients are the people telling us this is necessary."
"The clients really want just one system they can access the liquidity through and handle the transactions through," he said. "They do not want to deal with a bunch of different offerings, so this should enable them to get to the prices from the names of the banks they trust and facilitate a competitive, liquid, transparent market."
Mr. Weisberg said FXall.com would be an open solution, and the group is accepting new member banks and other customers who simply want to use the network.
FXall.com banks would still compete with each other, so the transparency of the prices other members are offering will have a financial effect on banks, Mr. Weisberg said.
But FXall.com would facilitate the elusive goal of "straight-through processing" of transactions, lowering the costs to everyone involved.
