Prime brokerage on Currenex by close of year

“The constraint of requiring a credit counterparty relationship to be in place before a fund or corporate can transact with a bank has limited liquidity in forex up until now, but we are about to change all that,” said Mirek. A number of banks, including ABN Amro, Barclays Capital, Standard Chartered and Lehman Brothers, have already signed-up to provide the prime broker role on Currenex’s forthcoming enhanced market access (EMA) facility.

Corporate, traditional fund and hedge fund clients currently trading via Currenex have potential counterparty lists that only include the names of dealers with which they have established credit lines. “The client may only have the resources or appetite to manage, for example, a dozen credit counterparty relationships – so there’s a real limitation in terms of it getting the best quote for a trade,” said Mirek.

EMA will overcome this natural limitation by supplementing the normal counterparty list with a number of prime brokers, or ‘hub’ banks – effectively loaning their own inter-bank credit lines to the client.

“EMA takes online forex trading one step further. A multinational corporate will be able to get many more quotes without establishing more credit relationships, and can streamline the clearing and settlement of trades,” said David Blair, managing director of Nokia Treasury Asia.

Later on, credit brokers, banks that do not quote forex prices or do clearing or settlement, but simply guarantee credit between the buy side and sell side for a fee – will be introduced onto the service by the end of the second quarter of 2002, said Mirek.