Electronic communications networks, for example, now account for some 45 percent of trading in Nasdaq stocks. It’s a different story in the foreign exchange market, where only 5 to 10 percent of the roughly $1.2 trillion in daily volume trades electronically. “FX is the largest marketplace in the world by many multiples, but it’s made the least progress toward innovation,” says David Ogg, founder and chief executive officer of Hotspot FXi.
Overshadowed by three bigger multidealer trading organizations - bank-owned consortia Atriax and FXall and venture-capital-funded Currenex - Hotspot got off the ground last January with a network enabling investors and corporations to trade currencies directly, with no intermediary dealers. Next month Watchung, New Jersey-based Hotspot will open a separate institutional trading platform. It is assured of some all-important liquidity, thanks to AIG International, a division of insurance giant American International Group, which has agreed to use the system actively and to offer counterparty credit guarantees to encourage the participation of smaller institutions, such as hedge funds.
Ogg is betting that that the market can use more than just one electronic trading venue. “I think it can definitely support the best trading platform,” he asserts, referring to Hotspot, of course.
