It has all the markings of a price war. FXall eliminated transaction fees for
users of its online foreign exchange trading site in late June, one month after it was launched and just days before rival Atriax opened for business.
Atriax, which is owned by a consortium of big banks, had been actively promoting its no-fee feature.
In the offline world, when customers call dealers for quotes and trades,
they do not pay trading fees. However, when online exchange Currenex was launched 18 months ago, it charged both sides. Dealers pay $10 per $1
million per trade while corporates pay a transaction fee based on their total volume, averaging about $25 per trade. Some companies were afraid
Currenex would become the standard model.
“Many corporations, Oracle included, were finding the concept of a
competitive portal for foreign exchange pricing appealing, but were struggling with the added expense,” says Geri Westphal, assistant treasurer
at Oracle, which is a member of FXall’s Advisory Board.
Currenex doesn’t seem to be feeling any pressure. “We haven’t had any
pushback from the corporates on the fees,” says Karen Steele, Currenex’ vice president of marketing. “This model currently is working for us.”
Jan Berger, treasurer of Autodesk, a $936 million-revenue software maker,
uses Currenex and calls the fees “nominal.” What matters to him and his colleagues is how many of their banks can be reached through a single
platform, the ease of using the online technology and the extent to which online platforms aid straight-through processing.
Art Misyan, director of foreign exchange at $40.3-billion Merck & Co., has
not been tempted to go online. He says he’ll continue phoning around to dealers until Merck can “reap the benefits of straight-through processing,”
from online trade through confirmation. “That’s really the big gain,” he says.
Online Trading Suit
Maybe it’s because online trading volume is slow, but Pittsburgh-based
Grant Street Group, formerly known as MuniAuction, sued Thomson Financial for patent infringement in June. Thomson’s system for electronic
muni bond auctions runs on the model Grant Street patented in December 2000, the suit
“We believe this suit has no merit,” says Allison Hagan, Thomson
Financial’s director of public relations.
The Grant Street system can be used to auction corporate bonds as well.
Myles Harrington, Grant Street’s president, says that he suspects patent infringements at other sites. The patented system lets issuers trade bonds
over an electronic network through an auction format, using software for calculating interest costs. Harrington says that his chief intent with the suit
is to reap licensing fees from other sites.
WR Hambrecht and Bear Stearns, which operate the OpenBook and
DAISS corporate bond auction systems, respectively, have each applied for patents on their systems, firm officials say.
Update on Virus Insurance
FM Global, bucking a trend, is soliciting property and casualty business to
cover computer data that is lost or destroyed.
While many of its rivals are rewriting contracts to exclude certain
computer-related losses (“Insurers Flee from Computer Virus Coverage,” T&RM, June 2001), the Rhode Island-based insurer has changed its
policies to explicitly cover direct physical losses to data. It also is offering
to sell customers who successfully pass an e-risk assessment additional coverage for business interruption and data damage caused by maliciously
A “whole host of customers” have asked for risk assessments, says
Roland Bonitati, FM Global’s senior vice president of marketing. “We believe all loss is preventable, based on our ability to understand it. When
we do understand it, we’re prepared to insure it.”
Whether a single insurer can make a dent in computer virus exposure,
however, is doubtful. Large companies usually need to work with several underwriters to get adequate coverage amounts, and to date no others have
stepped up to the plate, insurance experts say.