Platforms fight for electronic liquidity

A number of these platforms are coming up to one-year anniversaries. Accelor, FXall's electronic communications network, celebrated its first birthday of officially being live last month. Meanwhile, March marks a year of operations for the Chicago Mercantile Exchange and Reuters's joint-venture platform, FXMarketSpace (FXMS).

Although no-one can genuinely argue about the time it takes to build up decent liquidity on any platform, the demanding requirements of banks and buy-side traders alike mean that what has been achieved to date on either venue is not enough.

Discussions with industry participants indicate that the technology at Accelor and FXMS is not the problem. One market participant claimed that "as a platform, out and out, Accelor is one of the best platforms in the market there is". The source said that, if there were better liquidity on Accelor, it would sweep away rival platforms LavaFX and HotspotFX.

This explains some of the new initiatives both platforms are embarking on. At the end of last year, FXMS announced its profit-share scheme, dubbed JumpBall, which began on January 15 and runs through to September 30. The scheme allows trading firms with the highest average daily volumes in that time to receive a share of the platform's profits for up to four years. The concept is borrowed from the equities markets, where it has proved successful.

Meanwhile, FXall is believed to be working on a new integrated front end that will enable clients to trade on liquidity from its relationship management platform QuickFill as well as Accelor. The initiative is hoped to increase liquidity on Accelor, and QuickFill, although the exact details of how it will work are not available publicly.

FXall declined to discuss the initiative at this early stage of development, but said often a combination of methods is needed to service the full spectrum of clients' needs. "We are constantly working to develop new products and services that anticipate the demands of our client base," the company said.

What I'm sure the company is also mindful of are those old fears about pricing and ensuring price providers' ability to make money.