Reuters Enhances D2000 Product Line In Bid To Boost Marketshare

September proved a busy month for Reuters, which undertook a number of initiatives to boost its Dealing 2000 product line, explains Rosalyn Wilton, managing director for transaction products, with corporate global responsibility for risk management products.

In addition to launching its now four-month-old Dealing 2000-2 Forwards FX matching service in several centres throughout the Asia-Pacific region, Reuters also added a number of new currency pairs to the service and launched its Dealing 2000-2 Spot service in Russia, among other endeavours.

The forwards service launched June 9 with dollar/mark in London, New York, Frankfurt, Paris and Zurich (FXW, May 26). Dollar/yen, sterling/dollar and dollar/Swiss franc were added in a staggered introduction, as Tokyo, Hong Kong, Singapore and Sydney were brought online last month (FXW, August 18). Additionally, the forwards service was recently launched in Austria, Canada, Belgium, Luxembourg, and the Netherlands.

Now, says Wilton, the service has been installed in nearly 200 banks in 14 countries. In addition to the four major currencies, the forwards service now also trades the Hong Kong dollar, following demand from local participants for the domestic currency.

Reuters is planning to launch the forwards service in Italy, Spain and Scandinavia, as well as add a number of European currencies over the next several months. Wilton says there is also demand for forwards on the Mexican peso, which has proved a successful currency on the D2 Spot service. Additionally, she says Reuters plans to add the Australian and Canadian dollars to the service by year-end.

Wilton disagrees with claims voiced by some market participants that deal sizes are small on the forwards service, saying that the average (for both short and long dates) across all currencies, is in excess of $60 million (per single ticket). Of this, she says the short-end averages much larger deal sizes by comparison, in the $100 million-plus range, but points out that at $60 million, the average size across the curve cannot be deemed as "small" (FXW, September 15). She adds that there is more activity in the one year period at this stage than was previously estimated.

Furthermore, Wilton says that the largest single ticket on the service so far has been in excess of £500 million (approximately $800 million) and that the service sees bids/offers on the short end, in excess of DEM900 million.

Wilton also dismisses claims that the procedures for checking credit lines are holding the service back. The forwards service was designed so each bank inputs a "yes" or "no" to counterparty banks, so a deal is only matched on price with an approved counterparty; however, the respective banks must then conduct a manual credit check to determine whether or not lines are available for the amount of the deal.

"This gives banks the opportunity to negotiate on final quantity--not on price," she says. "Forwards don't trade at the same speed as spot, so the electronic medium provides an easy way to transact business. The value lies in the ability to get to the counterparty--the geographic reach--by showing a price on the screen and then having the opportunity to complete a deal."

Reuters' sole rival in the electronic broking field, Electronic Broking Service (EBS) estimates that the electronic brokers (both EBS and Reuters) account for 50 per cent of the brokered spot market in London, 30 per cent in North America and 50 per cent globally.

Of this, EBS estimates that it has as much as 37 per cent of the London market; 18-20 per cent in North America; and 35-40 per cent of spot turnover globally. While these numbers are EBS estimates, local regulators in Singapore and Tokyo require such data and have produced numbers that show EBS has 50 per cent of the total spot broking market in Singapore, while in Tokyo, EBS commands 50 per cent of the spot dollar/mark and dollar/yen activity.

However, Wilton says that in London, Reuters has about 20 per cent of the London brokered market in spot, and as for Asia, she admits that EBS is dominant in the yen given its merger with Minex, but says Reuters has the major marketshare of sterling globally, as well as the major marketshare in domestic currencies.

Reuters' spot service now trades in 33 currency pairs in 32 countries. The service is installed in more than 1,200 sites with nearly 7,000 keystations, says Wilton. By contrast, EBS trades 19 currency pairs in 26 countries and has installations at 700 bank sites with 2,500 keystations. While EBS claims average deal size near $3 million, Wilton says average deal size on the Reuters spot service has been increasing and is now close to $2 million.

"Our strategy is one of broad currency coverage with large geographical distribution, which is where we think our strength lies," says Wilton. "We have liquidity in a range of currency pairs that EBS does not have."

An EBS official says it is "always reviewing" new currencies and markets, but that nothing is imminent at the moment. EBS did recently add several Scandinavian currencies (FXW, September 1). The Danish krone, Norwegian krone and Finnish markka went online on September 1.

Wilton explains that, due to its "strong geographic reach and broad currency coverage", Reuters' primary marketshare in spot is at the metro level. This sector, she says, comprises a wider range of banks than the 14 major bank shareholders of EBS--although she does concede that these represent the majority of the largest forex trading banks in the market.

This, she says, translates into a strategy whereby Reuters has strong geographic coverage and currency distribution, and is not reliant on a small number of banks for business. "The foundation of our business was built on the idea that many banks would contribute towards pricing and trading," she says.

Wilton also points to growth in its Dealing 2000-1 conversational service, particularly in Asia, where it has experienced 50 per cent year-on-year growth. She says there are now just under two million conversations per week on the service.

"When we look at our business, we don't segment it by just looking at spot FX matching--we look at the transaction product line--which includes Dealing 2000-1 and Dealing 2000-2, as well as transaction data feed products such as Deal Tracker," says Wilton.

One enhancement Reuters is currently beta testing for the spot service is a feature that enables traders to see one enlarged currency on the screen. This feature, says Wilton, should appeal to the larger banks, because it enables those trading one currency pair to better focus on prices.

Another feature Reuters is planning to make available to users of its Dealing 2000-2 service is a digital price feed. The feed will be available for no additional charge to D2-2 sites that are trading a minimum of 40 deals per month per keystation. The feed will allow D2-2 sites to get price data on bid, ask and last, that can then be used in analytic and proprietary products. Wilton says the feed will be released "soon" and will be part of the Money 2000 information building block, but stresses that it will not be available outside the D2-2 community.

Meanwhile, Reuters is currently in the research stage of a re-engineering of its dealing product line, to create a "more flexible product" for the market, says Wilton. Although she declines details of this project, she says it is similar to the revamp undertaken in the late 1980s when the Reuter Monitor Dealing service was enhanced to introduce Dealing 2000-1.