Foreign exchange: the entrepreneurs' market

In three years, the private company majority owned by Spencer, IPGL, has indirectly been involved in some of the fastest-growing segments of the FX market. Examples of vehicles for its foray into FX from this issue of FX Week alone are interdealer broker Icap, and retail equity and FX trading company City Index.

Icap first made a significant break into the FX market with its April, 2006 acquisition of electronic interdealer spot FX broker EBS. Since then, the formerly bank consortium-owned broking system has maintained a strong hold in FX trading, with average daily volumes of $253.1 billion in March this year alone.

Last year, the interdealer broker expanded its footprint by targeting the post-trade end of the foreign exchange market with its December acquisition of post-trade technology vendor Traiana for $247 million. Traiana has been at the forefront of many innovative solutions targeting the contentious back-office capacity issues at banks. Its Harmony network is already used by over 50 of the world's leading banks for post-trade processing of FX transactions.

Then there's City Index, which earlier this year made its big break into the retail FX market with the February acquisition worth around $300 million of retail FX trading company FX Solutions. The technology used was founded by two quants, Thomas Plaut and Robert Cortright, who also worked with algo-driven pricing and trading specialist, Financial Labs now owned by Bank of America. Although still early days, it is understood that the platform has already made a substantial contribution to City Index's revenues.

With so many fingers in so many pies, the opportunity to inbreed business developments is high. That is, however, said with a strong caveat. When Icap acquired Traiana, the broker was clear that it would not interfere with Traiana's relationship with other platforms. To that end, Traiana has continued to run autonomously, with no complaints from rival platforms.

Yet this latest deal specifically states exclusivity, which seems slightly protectionist. But then I guess it depends on how significant the sales pitch proves to be.