Consolidation is the key theme

Over the past few years, we've seen some degree of that with the closure of Atriax and Centradia, but overall the picture looks fairly confused. Last year is a prime example. Electronic communications network (ECN) Hotspot and spot broker EBS found new homes, with trade execution and asset-management service provider Knight Capital and interdealer broker Icap respectively.

But then Reuters and the Chicago Mercantile Exchange announced they were going to launch a new centrally cleared anonymous trading platform, FXMarketSpace. Trading technology vendor FlexTrade has launched MilanFX, the first block FX trading platform for the sellside and buyside.

Meanwhile, ECN LavaFX said it was launching an interbank platform, while eSpeed is rumoured to be doing the same.

Then there's FXall. After receiving $77.5 million from a minority stake sale to private equity firm Technology Crossover Ventures (TCV), the company was able to move forward with its plans. It seems a timeline has been set for its anonymous trading platform – code name project Lynx – scheduled to go live this month.

Some analysts expect the size of the FX market to reach $3 trillion a day this year, with a more diverse range of players and lower barriers to entry through electronic trading platforms. And client strategy firm ClientKnowledge says the four major platforms – FXall, FX Connect, Currenex and Hotspot – represent less than 20% of the total FX market. So is there still room for more?

Jeff Feig, global head of FX at Citigroup, expects to see some portal consolidation this year. He said there has been a proliferation of channels to trade FX, resulting in transparency and spread compression.

A market analyst concurs, adding that platforms are established to exploit features that do not exist in the incumbent venues, or to exploit a particular customer base that hasn't been tapped yet. He said: "A lot of these systems fail, but the ones that don't fail often end up getting bought by the larger fish."

As such, there are always going to be new entrants, even in mature markets. "But what weeds out the winners from the losers is going to be whether it's successful enough to merit the attraction of another larger platform in this case," he added.

It should be interesting to see...