Online FX firms Atriax, FXall in merger talks
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A merger would allow FXall and Atriax to cut costs and eliminate overlap in the nascent online currency market at a time when big banks are looking for ways to save money.
Both companies have been struggling for business, despite their backing by major Wall Street and European banks, in a marketplace where early start-ups Currenex and FX Connect have staked out a strong foothold.
A source with one of FXall's backers said discussions are ongoing.
"I heard rumors about it and they have been confirmed from the different parties," said one industry source who has spoken with several of the banks backing the two online trading platforms, as well officials at the companies.
FXall would not comment. CEO Phil Weisberg, who last summer said he anticipated a lot of consolidation in the industry, refused to confirm or deny the merger talks. Atriax officials did not immediately return a call seeking comment.
While the companies do not provide trading volume data, a study by technology research firm TowerGroup last September showed FXall and Atriax significantly lagged market leaders Currenex and FX Connect.
The report showed Atriax averaged $220 million in daily transactions in August 2001, edging out FXall's $200 million daily average. But neither company compared well with TowerGroup's estimates of $1.35 billion daily average for independent Currenex last summer and the $5.75 billion average volume at State Street's FX Connect.
Average daily trading volume in the global foreign exchange market totals about $1.2 trillion.
Electronic trading systems offer customers quicker and cheaper trading than traditional telephone-based brokering by bringing multiple buyers and sellers onto one electronic platform. But online foreign exchange trading so far has failed to live up to expectations.
Online trading trend
The possible merger mirrors consolidation in other electronic arenas, notably in the online bond market, where nearly one-third of e-commerce platforms have merged with stronger partners or gone broke.
FXall and Atriax, since their launch a year ago, have been grappling for the same customers, both offering very similar technologies. Analysts have been expecting consolidation.
"Both have been losing a lot of money doing the same thing," said one industry expert.
The platforms, which some experts estimate cost $100 million each to build and operate, are backed by the dominant dealers in foreign exchange but have failed to capitalize on their support.
FXall and Atriax went live within a month of each other last summer. They are owned by a bevy of Wall Street and Europe's largest securities firms.
FXall was started by seven banks, including Bank of America (BAC.N) and Goldman Sachs & Co.(GS.N), and began trading last summer. Atriax was founded by Citibank(C.N), Deutsche Bank (DBKGn.DE), Chase Manhattan Bank (JPM.N) and Reuters Group Plc (RTR.L) (RTRSY.O). It started trading at the same time as FXall.
Reuters is also a strategic partner with FXall.
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