Source: euromoney.com Date: April 04 2001, by Tessa Oakley
OANDA, the online currency research and forecast-tool provider, has added a foreign exchange trading platform to its range of offerings, fxTrade. The platform is open to any user and will accept trades from as little as $1.
Margin trading up to a factor of 20 is possible on the new platform. Anyone from individuals changing money for foreign travel, to market speculators, portfolio managers or corporates can trade. OANDA acts as market maker and counterparty to all trades.
The platform is automated and offers a standard service to all - one price is quoted for all users, regardless of their levels of execution on the system. Someone trading $1 on a one-off basis can expect the same average spread as a user regularly trading large tickets. This means that small-ticket trades, which are commonly exposed to wide spreads, can benefit from spreads as tight as two or three pips. A team of traders also monitor and manage risk on the system, and are ready to intervene when markets are illiquid.
Says Richard Olsen, chairman and co-founder of The Olsen Group, of which OANDA is the internet arm: "Our idea was to create the first truly democratic foreign exchange market. Forex is 50 times larger by volume than the equity market, yet has strangely remained like an exclusive club."
Olsen says he has been surprised by the amount of interest in fxTrade. Since the platform launched live trading on March 25, it has had an average of 10 new registrants a day. It does not charge transaction fees on trades, but is instead relying on trade volume to make a profit. It offers trading 24 hours a day, seven days a week. Outside regular market hours, spreads widen.
"This is a superb time to enter the online trading market," says Olsen. "People are already acquainted with the idea and the fizz has gone from the equity market so they're searching for an attractive alternative."
Traditionally, interest rate payments on open, and closed, positions are settled overnight but continual interest rate crediting makes the market more stable and requires less intervention by central banks. fxTrade can handle 100 transactions a second in 10 currency pairs, and it provides continuous interest rate payments. Eventually Olsen expects that this will be the norm.
OANDA does not offer interactive advice for users of fxTrade. Instead, it provides forecasting tools and market research to help people make trading decisions. Having no fx sales force is one of the ways that it guarantees to keep its costs at a minimum. This also means that it will never secure the market's big-ticket trades, for which investors often seek advice.
Olsen also plans to white label the fxTrade technology, which The Olsen Group built in-house. This means that small banks that can not offer an automated fx service to their customers will be able to offer fxTrade to their own clients under their own name.
