Flextrade Debuts Block Trading Support

NEW YORK—Trading technology vendor Flextrade plans to launch the first block foreign exchange (FX) transaction platform for the sell side and buy side next month.

Other players, including spot broker EBS, are also understood to be considering similar initiatives amid frustration among market participants over the difficulties in trading large blocks with minimum market impact.

Flextrade's platform, called MilanFX, will enable users to execute large-block FX trades, typically at $100 million-plus face value, anonymously and without market impact or information leakage, Flextrade officials tell sibling newsletter FX Week. Users will join an undisclosed community of traders to complete trading. The vendor says the system will virtually eliminate gaming and predatory flow.

The platform will display an indicative mid-point price based on an amalgamation of "a significant source" of bank providers. It will be delivered via the Web, a FIX protocol API or directly through Flextrade's FlexFX offering, say Flextrade officials. Banks, hedge funds, commodity trading advisers and real-money managers are the targeted users of the platform.

Justyn Trenner, CEO of client strategy firm ClientKnowledge in London, says that there is interest among major sell-side firms—and a limited number of hedge funds—to find a mechanism to anonymously establish mutual interest for large trades, manage the risk and split the bid-offer spreads. "However, during the course of this year, there has been much discussion, both publicly and behind the scenes, involving others including Lava Trading and Icap/EBS showing interest in this space," Trenner says.

As such, new entrants such as Flextrade will face a challenge getting users to actively participate over the platform. "Liquidity begets liquidity and one should not underestimate the head start that others may have," says Trenner.

EBS officials confirm that it is carrying out research and development into a solution to enable efficient electronic transaction of flow. "This work is due to feedback from a number of counterparties who wish to have the facility to submit large orders into the EBS Spot matching system with other bank counterparties without impacting the standard market," says an EBS official. The Icap-owned business is working with a number of organizations to determine market requirements and is in the early stages of investigation. "It is part of our day-to-day business to research innovative solutions for the market and it is by no means certain that this option will be commercialized," the official says.

Lava Trading officials could not be reached by press time.