JPMorgan Chase & Co. says it's the first dealer to giveclients sophisticated outside analysis of their currency trades,betting they will like what they see and become repeatcustomers.

The bank has teamed with a London startup called BestX toinspect JPMorgan's algorithms, giving outside confirmation they'refunctioning as intended. The world's second-largest currency tradersays the independent, third-party analysis will be available tocustomers on Feb. 1.

Trading titans are rolling out new ways to dissect and analyzetrading as they compete for a bigger slice of the $5.1trillion-a-day currency market. The services, typically known astransaction cost analysis, come amid mounting regulatory pressureon asset managers to prove they're not overcharged by brokers. Italso highlights how devilishly difficult it can be to determinefair pricing in the relatively opaque currency market.

“We feel very strongly that clients are looking for moretransparency,” said Richard James, co-head of markets execution inLondon for macro products at JPMorgan. BestX was founded by OliverJerome and Pete Eggleston, who previously worked in foreignexchange at Morgan Stanley.

JPMorgan isn't alone. Computerized market maker XTX Markets Ltd.also has a new offering, which it's been testing with clients thisyear and which goes live this week.

The rise of electronic trading means there's ample data toanalyze, says Michael O'Brien, director of global trading at mutualfund company Eaton Vance Corp. At JPMorgan, for example, more than95 percent of clients' spot trading transactions are electronic,while algorithmic trading is increasing 50 percent annually.Recent market manipulation scandals and so-called flash crasheshave attracted more attention to the market's plumbing, O'Briensaid.

“This is all a good thing — it pushes foreign exchange to becomemore transparent,” he said.

The currency market is particularly muddy. It's over-the-counterand splintered across many platforms that list different quotes.There's no standard price for a transaction, and costs can varydepending on creditworthiness and style of trading. A controversialpractice known as “last look,” in which market makers can back outof a trade, has also caught regulators' attention.

It can be easier to inspect other markets. U.S. stocks have apublic price feed that makes it easier to ascertain fairpricing.

But the currency market's complexity can be unraveled with someanalytical horsepower. BestX pulls together prices from manyliquidity providers to come up with a measure for itsbenchmarks.

Market impact — how much prices move after a series of tradeshas begun — is one consideration. Last look also complicatesthings. When a market maker backs out of a trade, that could costan investor money. XTX's platform calculates the cost of missingout on that transaction.

“There are all these costs, but you might not see them,” saidJeremy Smart, global head of distribution at XTX in London. “It'sthis jigsaw puzzle with a crucial piece in the middle missing.We're providing that piece.”

Bloomberg LP, the parent of Bloomberg News, provides transactionanalysis services.

Of course, there's a potential conflict of interest when amarket maker analyzes itself for its own customers. Using a thirdparty allows JPMorgan to sidestep that problem. XTX says it maypartner with other firms and open source its system.

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