The Justice Department, according to Reuters, is taking a look at some of the new Web-based foreign exchange trading consortia.
To be sure, it's a bit awesome to see the big names that are ganging up with each other. Citigroup, Chase Manhattan and Deutsche Bank are leading a group of 50 banks in a consortium known as Atriax (see U.S. Banker, Dec. 2000). And J.P. Morgan, HSBC, Deutsche Bank and Bank of New York are leading another 13-bank group, FXalliance. (By the way, once Chase's acquisition of J.P. goes through, which group will the merged bank belong to?)
The groups are daunting in their power and size. But we find it unlikely that they actually will be anti-competitive. They tend to be such bitter rivals, it's hard to imagine them colluding in the forex field.
The big question is whether they'll be able to work together. In fact, if the system works as planned, with each bank offering its own quotes from the same platform, it could actually make the business more competitive.
But one can never be quite sure, and it could make a lot of sense to have the Department of Justice in Washington do a bit of probing. Nor will it hurt to have Justice keep an eye on the ventures to assure that the foreign exchange business remains competitive.
