LONDON Jan 23 ParFX, a currency trading
platform launched to curb the advantage of high-frequency
traders, will allow hedge funds to join banks in its trade to
increase liquidity and create a wider trading community.
The platform, featuring technology to level the playing
field between slower and faster clients, has been exclusive to
banks with 12, including Deutsche Bank and Barclays, backing it
since its launch last April.
"In the coming months, we will allow customers to trade
through their prime broker alongside the banks," said Roger
Rutherford, chief operating officer at ParFX.
The latest BIS triennial survey of the currency market shows
hedge funds and proprietary trading firms have a 11 percent
share of the $5-trillion-a-day global currency market. The spot
currency market sees a daily turnover of $2 trillion a day.
The main clients for prime brokerages, which are usually
owned by banks themselves, are hedge funds. Hedge funds often
run machine-driven algorithmic trading programmes, or algos,
that pump out a large number of small orders at a super-fast
High frequency trading strategies which have proved highly
controversial are sometimes run by hedge funds, although many
are managed by proprietary firms betting on their own money.
The growing prevalence of high-frequency trading has raised
concerns about fairness in markets and whether those with the
fastest technology are putting other investors at a disadvantage
or creating dislocations as a result of their speed.
Currency platforms like ICAP's EBS, which have
players including banks and corporations, have recently shown
resistance to allowing high-frequency trading to proliferate.
ParFX is a major initiative by the big global banks to check the
presence of high-frequency, anonymous traders.
ParFX, though, will ensure the entry of prime brokerages
does not lead to the domination by high-frequency traders.
"We understand that certain types of trading behaviour exist
because they have a mask of anonymity. This will not be the case
at ParFX - buy side firms that trade on our platform will be
subject to the same rules, compliance and full transparency as
existing players," said Rutherford .
"Controls will be given to the prime brokers so that there
is an elegant way to control and act on behalf of their