High-Frequency Pushback Starts

Currency dealers fighting back against high-speed trading as FX profits fall.

Foreign-exchange dealers say they have the solution to the high-frequency trades eroding banks’ profits across financial markets.

A currency-dealing platform known as ParFX, established in 2011 by firms from Deutsche Bank AG to Citigroup Inc., was approached last month by banks asking if its technology could be applied to other asset classes, Chief Executive Officer Dan Marcus said. The system works by pausing trades at random to prevent dealers with high-powered computers from jumping in front of investors and gaining an advantage.

Currency dealers are fighting back against high-speed trading as profits from foreign exchange tumble.

The trillions of dollars that central banks pumped into markets in the wake of the global financial crisis have damped the trends that currency dealers rely on to make money. Foreign-exchange trading revenue at U.S. commercial banks totaled $1.53 billion in the fourth quarter of 2013, compared with an average $1.7 billion over the past two years, the Comptroller of the Currency said on March 31.

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