Bloomberg and EBS alliance takes aim at Reuters' FX business
21 May 2003 | 9054 views | 0
Bloomberg is to compete head on with Reuters in the market for electronic foreign exchange dealing under a far-reaching alliance with bank-backed network EBS.
Under an exclusive global distribution agreement, EBS Trader will be launched on the Bloomberg Professional service from late third quarter 2003 and will enable customers to communicate and execute directly with other FX professionals.
The alliance will provide news, market data, charting and analytics on a single platform from a single login. EBS Trader on Bloomberg will provide pre-trade, trade and post-trade services, including conversational direct dealing, audit trails and risk management tools.
Announcing the agreement, Jack Jeffery, chief executive officer, EBS, says: "The alliance provides us with the opportunity to increase sales to existing customers and to offer new FX-related services to a much broader customer base."
Approximately $90 billion a day in spot foreign exchange transaction is conducted over the EBS Spot Dealing System, which was launched ten-years ago by a partnership of the world's largest foreign exchange market making banks as a counter to Reuters' growing dominance.
The threat to Reuters' business by the new venture has been pooh-poohed by industry analysts at Morgan Stanley, however, who point out that EBS's share in the sterling market - where Reuters makes most of it revenues - is only 15% and it lacks liquidity.
More likely, Bloomberg will seek instead to piggyback on EBS's success in the forex derivatives market which is higher growth and where Reuters lacks a stranglehold.
In a research note, Morgan Stanley says: "We do not think it is a new threat to c.£300mn of revenues Reuters gets from dealing directly...Ultimately it says more about the problems Bloomberg have in finding growth in their traditional products"
Some 18,000 corporate clients use Reuters' systems for conversational direct dealing in foreign exchange. Unlike other aspects of Reuters' business, the treasury broking division has been buouyed by recent volatility in the foreign exchange markets. The business posted record volumes in January and February this year and in March handled $130 billion in Forward FX and some 30,000 Spot FX matches, the second best day since the service was introduced.