A Bermuda-based company is about to launch a foreign exchange trading platform that it says will revolutionize the way forex is traded according to a report in the Royal Gazette last week.
The new platform, known as Forexter, eliminates the need for a banking intermediary thus enabling buyers and sellers to deal in forex directly in much the same way as any other exchange-traded instrument - except without the exchange. This process is known as disintermediation.
However, though the system could be perceived as a threat to the traditional role of banks as the market maker in the FX market, one major bank in the form of Bear Stearns has decided to whole-heartedly embrace the new idea. The bank is keen to be associated with Forexter which it sees as highly innovative and beneficial to their clients. "We believe that Forexster is part of the next-generation of FX trading applications," said Ross Taylor, senior managing director at the New York headquartered bank.
The project is the creation of Bosnia-born Arman Glodjo who gained a reputation as a highly skilled systems designer working for the notable Bermudan trader John Deuss.
All users of the Forexter system will be able to trade with their clients and market counterparties anonymously, and the platform is designed to give direct order matching and "request for quotes" services to any participant.
The fact that Bear Stearns have already come on board is likely to give the system some clout, and Glodjo predicts that many other heavy-weight banks will begin to take an interest. "We believe that others will follow and that Forexster will provide a large, liquid, and a truly efficient mechanism for FX trading," commented Glodjo.
The foreign exchange market is the world's largest and most liquid market, accounting on average for about $1.5 trillion worth of transactions per day. Whilst every company that participates in international trade has some level of exposure to the market, by far the overwhelming volume of trade is of a speculative nature.
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