A brave new world for foreign exchange?

At that time, access to the FX market was about to become much easier, with the launch of a series of multi-bank portals. This change forced banks to be much more competitive, and drove a significant amount of technological innovation that continues to bear fruit. Highly developed single-bank portals delivering a bewildering range of currency pairs and contract types are now available to those customers savvy enough to take advantage of them.

The increased competition and technological innovation that the new entrants initiated has also opened FX trading to a much wider audience, and turned it into an important diversification tool for alpha-hungry hedge funds. Smaller-scale investors have also increasingly seen the benefits of investing in an asset class that offers tight pricing and direct exposure to all the world's leading economies at the touch of a button.

The current launches, if they do what they are seeking to, could lead to another step up in FX activity, with even more interest from different parts of the market. This should lead to significant prizes for those that get their business plans right. But there will inevitably be casualties.

It should not be forgotten that Atriax and Centradia failed, with the backers of the doomed businesses overestimating the volumes they could hope to attract. While the CME/Reuters and Lava ventures may attract some new activity to the space, if successful, they will inevitably lure business from existing players, who are already fighting hard to ensure their long-term viability.

However, those already established in the market have market share that should sustain them for the immediate future. FX Connect dominates much of the real-money community; FXall benefits from good corporate take-up; Currenex has diversified into selling technology solutions; and Hotspot has a good number of hedge fund clients. All these companies have strong backers that can support them when times get tough.

In the longer term, however, with more players entering the market, consolidation is inevitable. Even a backer with deep pockets will want to see at least the prospect of a steady and strong revenue stream. The onus is on the new entrants, though, to convince a sceptical market that they offer something that isn't already available.