FXMS initiatives need to see volume

It also signals yet another push by the Chicago Mercantile Exchange and Reuters' joint-venture platform to carve a niche among the high frequency trading community - both on the buy- and sell-side. First it was the general concept of using a central counterparty to trade spot foreign exchange through the CME Clearing House, although this was introduced with limited success by eSpeed with eSpeedFX.

A second significant initiative was the system's JumpBall profit-share programme, which will allocate 37.5% of its pre-tax profit between the most active traders. The scheme runs from January 15 to September 30 next year, with trading firms with the highest average daily volumes (ADV) in that time receiving a share of the platform's profits for up to four years.

Officials at FXMS said it's been very well adopted by the buyside and reasonably well adopted by the sell-side. This, they say, is mainly because the sell-side just take longer to do things. However, they do admit that volumes haven't been overwhelming.

On the other hand, it has acted to bring back interest and get the platform further up the technology queues at banks, said Mark Robson, chief executive of FXMS. "It's doing what we wanted, which is confirming the pipeline of customers that are going to get deployed and probably moving up their plans for getting us deployed," he said. "It's also quite a long-term programme, it takes time. It's going to be several quarters before it builds."

This latest initiative, meanwhile, tackles a number of key issues that are moving up the agenda given the turbulent market conditions. Not only is it free (be it for the moment) and increases operational efficiencies, but it also manages replacement risk.

While CLS protects a trader from the loss of their principal, it doesn't help the trader actually complete the transaction they may have wanted to complete. With the CME as the guarantor, FXMS says additional risk is protected when using FXSettle and FXMarketSpace.

All the initiatives rolled out by the platform have been innovations for the FX industry. But until some real volumes start going through consistently, they risk remaining just initiatives.