Reuters and ICor Brokerage, the electronic derivatives broker, have created a new 50/50 joint venture, ICor Brokerage Ltd, to develop electronic brokerage services for the global inter-bank foreign exchange options and interest rate derivatives markets.
Reuters is initially contributing $10 million in cash to the joint venture. It will also host the ICor broking system on its Dealing 3000 foreign exchange interbank trading system and license the use of the Reuters brand. ICor Brokerage is contributing all its existing business into the new venture.
The new venture will initially focus on electronic broking services for foreign exchange options, with a planned global roll-out starting in Asia from January next year, extending to Europe and North America later in 2002. The company also plans to expand to offer interest rate swap and interest rate options broking from the second half of 2002.
Reuters says it will develop post-trade connectivity which will link the trading desks of ICor’s customers to their middle offices for risk management and settlement purposes, so reducing transaction-processing costs.
Jeff Larsen and Neil Chriss, currently chief executive and president of ICor Brokerage respectively, will have the same roles in the new venture. Julie Holland, chief executive of Reuters treasury customer segment will become chairperson.
Holland says: “There are opportunities for electronic brokers to gain a share of this $800 million market for broking foreign exchange and interest rate derivatives. Currently most transactions are carried out by voice brokers.”
Larsen, says ICor has attracted over 50 banks to its foreign exchange e-brokerage service since its launch in January 2000. He believes the partnership with Reuters will enable the company to build liquidity fast.
"The founding members of ICor all come from banking, broking, trading and systems backgrounds with years of experience in the cash and derivatives markets," he says. "We believe that the combination of Reuters presence and our broad view and understanding of this market puts the new venture in a very strong position.”