Market-making/principal FX brokers typically assume the opposite position & risk from their clients' trades, which causes an immediate conflict-of-interest The brokerage gains when the clients lose. One of the most important factors that set MatchbookFX apart, however, was its 100% pass-through, "agency" brokerage model, as opposed to the 'market-maker/principal,' or 'counterparty' model which was far more common at that time, and is still. Though such a configuration is now commonplace, it was widely considered by those in the industry to be a technological innovation in 1999. Matchbook FX was also unique in that, in addition to its own user-generated bids and offers, it was the first ever e-FX trading platform to feature dynamic fully automated, executable streaming currency prices (as opposed to Request for Quotation "RFQ" driven prices) contributed directly from a major FX bank (rumored to have been Deutsche Bank). As such, Matchbook FX was considered to be one of the main catalysts that presaged rapid technological advances, sharp compressions in bid/ask spreads, and other sweeping changes into the currency market. This process allowed users to join or better the prevailing prices in the network and thus directly impact (and tighten) the bid–ask spread widths on which they traded. Matchbook FX functioned as an open limit order-book, also known as a Central Limit Order Book or CLOB – similar to an online exchange – where any participant subscribed to the network could either post its own bids and offers just like a market maker, or immediately trade on any other existing bids and offers for a given currency. ĭespite on-line FX " e-trading" being rare at the time, Matchbook FX's ECN approach was considered unique by market participants because of its stated aims to democratize the Foreign Exchange market by empowering all " Buy side" FX participants (including retail traders and institutions) to be, for the first time, Market Makers or Price Makers, instead of only Price Takers. Prior to Matchbook FX, most FX trading was transacted mainly by phone or amongst large banks (such as Chase, Goldman Sachs, UBS, Deutsche Bank, or Citibank) in the "interbank market" or by phone between large banks and their multinational corporate clients (such as IBM, Intel, Coca-Cola, etc.) or institutional clients (such as hedge funds, pensions, mutual funds, and other asset managers). Matchbook FX was recognized in 2000 as one of Silicon Alley Reporter Magazine's "12 to Watch", its annual listing featuring top internet companies. Īs one of the earliest providers of open-access FX e-trading, Matchbook FX received considerable acclaim for its efforts to instigate change and level the playing field in the insular, closed, clubby, and highly profitable domain of interbank Forex dealing, likely to the chagrin of the major international money center banks.
Several months later,, a NASDAQ-traded financial news and technology firm, bought in as the third major equity partner in the three-way joint venture.
Matchbook FX was initially conceived by Daniel Uslander, Ron Comerchero (commodity futures and equities traders) and Josh Levy (former Goldman Sachs FX trader) of the New York-based proprietary FX trading firm Valhalla Forex Inc, as well as Mark S Smith of the Florida-based equities-trading technology firm NexTrade ECN. Founded in 1999, Matchbook FX (sometimes referenced as "MatchbookFX", "MatchBook FX" or "Match-Book FX") was the world's first open and inclusive internet ECN for Foreign Exchange trading, available to all willing FX trading participants including hedge funds, CTAs, banks, corporations and, uniquely at the time, retail FX traders as well.
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