Matchbook FX

Matchbook FX was an Internet-based electronic communication network, or ECN, for spot foreign-exchange trading. It operated from 1999 until 2002 and was created during an early phase of the transition from relationship-driven, largely telephone-based foreign-exchange dealing toward electronic execution. The platform was conceived by Daniel Uslander and Ron Comerchero, commodity-futures and equities traders, and Josh Levy, a former Goldman Sachs foreign-exchange trader, through their New York proprietary trading firm Valhalla Forex Inc. Mark S. Smith, associated with the Florida-based equities-trading technology company NexTrade ECN, was also involved in the venture. Several months after the initial conception, GlobalNetFinancial.com, a NASDAQ-listed financial-news and technology company, became the third major equity partner in the joint venture. Matchbook FX presented itself as an open and inclusive alternative to the traditional interbank foreign-exchange market. At the time, much institutional currency trading was conducted directly between large banks, or between banks and corporate and institutional clients. Access for retail traders was more limited, and market participants commonly interacted with prices as takers rather than contributing executable prices to a shared market. The Matchbook FX model used an open central limit order book. Subscribers could submit bids and offers for currency pairs, act as price makers, or execute against orders already displayed by other participants. The intended user base included hedge funds, commodity trading advisers, banks, corporations, and retail foreign-exchange traders. This design sought to widen participation in currency price formation and encourage competition among displayed prices. The platform also promoted automated streaming prices rather than relying only on request-for-quotation workflows. It was described as the first electronic foreign-exchange platform to feature dynamic, fully automated, executable streaming currency prices contributed directly by a major foreign-exchange bank. The platform operated as an ECN rather than as a principal dealer: according to the reference account, it did not carry market risk or manage foreign-exchange positions for its own account, limiting the potential for a dealer-versus-customer conflict of interest. Matchbook FX was also described as the first major United States-based foreign-exchange dealer to voluntarily submit to regulation by the National Futures Association. Its launch therefore combined an access-oriented electronic-market model with an effort to establish regulatory credibility in a developing retail and institutional online-trading sector. The company received recognition in 2000 when Silicon Alley Reporter included it among its annual “12 to Watch,” a list of notable Internet companies. Its financing environment deteriorated after the dot-com bubble began to collapse. GlobalNetFinancial.com, the venture’s principal financial backer, experienced a severe decline in its share price during 2000 and 2001, impairing its ability to continue providing operating capital. In 2002, Matchbook FX was sold to a consortium of investors, which decided to discontinue the brand. Later electronic foreign-exchange businesses, including Hotspot FX, FXCM, Gain Capital, Saxo Bank, and CMC Markets, operated in a market increasingly shaped by the type of electronic access and tighter pricing that Matchbook FX had helped demonstrate.

Matchbook FX emerged in 1999 as an electronic communication network for the spot foreign-exchange market. Its creation reflected a period when Internet connectivity and automated trading technology were beginning to challenge the conventional structure of currency dealing. Before the platform appeared, much foreign-exchange activity was concentrated in the interbank market and was executed through direct dealer relationships or by telephone. Large banks supplied prices to other banks, corporations, and institutional investors, while smaller participants generally had less influence over the prices available to them. The venture was initially developed by Daniel Uslander and Ron Comerchero, who had backgrounds in commodity futures and equities trading, and Josh Levy, a former Goldman Sachs foreign-exchange trader. They were associated with Valhalla Forex Inc., a New York proprietary foreign-exchange trading firm. Mark S. Smith of NexTrade ECN, a Florida-based equities-trading technology company, was also part of the founding group. Several months later, GlobalNetFinancial.com joined as the third major equity partner. GlobalNetFinancial.com was a NASDAQ-traded financial-news and technology company and became the project’s principal financial backer. Matchbook FX’s central innovation was its attempt to make foreign-exchange price formation more open. The network used a central limit order book in which participants could post bids and offers or trade against prices already displayed by other subscribers. This meant that users were not limited to accepting prices supplied by a bank or dealer. Hedge funds, commodity trading advisers, banks, corporations, and retail traders could potentially contribute prices and compete to make markets. The model was therefore presented as a way to turn more participants into price makers rather than leaving them solely as price takers. The network also supported dynamic, automated, executable streaming prices. This differed from the request-for-quotation model in which a participant asks a dealer for a price before deciding whether to trade. Matchbook FX was described as the first electronic foreign-exchange platform to receive such streaming prices directly from a major foreign-exchange bank. The change was significant because it connected continuous price distribution with an electronic order book and helped demonstrate how technology could compress spreads and accelerate execution. As an ECN, Matchbook FX did not take principal foreign-exchange positions or manage currency exposure for its own account. Its stated role was to operate the marketplace and match participant orders. This structure distinguished it from a dealer that might quote prices while also carrying positions against customers. The company also voluntarily subjected itself to National Futures Association regulation, an unusual step among United States online foreign-exchange dealers at the time of its launch and part of its effort to establish legitimacy in an emerging market. The company gained outside recognition in 2000 when Silicon Alley Reporter selected it for its “12 to Watch” list. The recognition came during a period of intense enthusiasm for Internet financial technology. That environment soon deteriorated. The dot-com bubble’s collapse made it more difficult for Matchbook FX to obtain operating capital. GlobalNetFinancial.com, whose support was central to the venture, suffered a major share-price decline during 2000 and 2001, weakening its ability to finance the network. In 2002, Matchbook FX was sold to a consortium of investors. The new owners decided not to continue the brand, bringing the company’s operating period to an end after approximately three years. Although the brand was short-lived, its open ECN structure anticipated later developments in electronic foreign-exchange dealing, including automated streaming prices, direct order-book interaction, and broader participation by non-bank market users. Subsequent businesses such as Hotspot FX, FXCM, Gain Capital, Saxo Bank, and CMC Markets operated as electronic foreign-exchange markets continued to develop.

• 2002

  Brand discontinued after sale

  [1]Matchbook FXen.wikipedia.org

  A consortium acquires Matchbook FX and decides to discontinue the brand, ending its operations.

• 2000

  Named among Silicon Alley Reporter’s “12 to Watch”

  [1]Matchbook FXen.wikipedia.org

  Matchbook FX receives recognition as one of the Internet companies to watch.

• 1999

  Matchbook FX is founded

  [1]Matchbook FXen.wikipedia.org

  The venture is established by participants associated with Valhalla Forex and NexTrade ECN to build an Internet-based electronic communication network for spot foreign exchange.

• 1999

  GlobalNetFinancial.com joins as an equity partner

  [1]Matchbook FXen.wikipedia.org

  GlobalNetFinancial.com becomes the third major equity partner in the joint venture and later serves as its principal financial backer.

• 1999

  Open electronic FX order-book model introduced

  [1]Matchbook FXen.wikipedia.org

  The platform offers an open central limit order book in which participants can submit bids and offers or execute against displayed prices.

An early, access-oriented electronic foreign-exchange marketplace designed to let institutional and retail participants both provide and trade executable currency prices.

• Electronic foreign-exchange trading network · 1999

  Matchbook FX ECN

  The core Matchbook FX service was an Internet-based ECN for spot foreign-exchange trading. It used an open central limit order book that allowed subscribers to post executable bids and offers or trade against orders already available in the market. The intended participants ranged from banks and institutional investors to hedge funds, commodity trading advisers, corporations, and retail traders. The platform emphasized automated streaming prices, direct price competition, and participation in market making rather than simple acceptance of dealer-supplied quotes.

• 2002

  Sell the business and discontinue the brandM&A

  Background

  The dot-com collapse impaired access to operating capital, while the company’s principal financial backer experienced severe financial-market pressure.

  Action taken

  Matchbook FX was sold to a consortium of investors, which chose to end the Matchbook FX operation.

  Aftermath

  The brand became defunct, although similar electronic foreign-exchange models continued to develop through later platforms.

  Source

• 1999

  Adopt an open and inclusive FX marketplace modelStrategy

  Background

  Foreign-exchange trading was still dominated by bank-to-bank dealing and telephone-based relationships, with limited access for retail participants.

  Action taken

  Matchbook FX built an open ECN and central limit order book intended to allow both institutional and retail participants to submit prices and trade electronically.

  Aftermath

  The model helped anticipate the broader move toward electronic execution, automated prices, tighter spreads, and wider market participation.

  Source

• 1999

  Use executable streaming prices instead of an RFQ-only workflowStrategy

  Background

  Many foreign-exchange transactions were arranged through direct dealer contact or request-for-quotation processes.

  Action taken

  The platform introduced dynamic, automated, executable streaming currency prices, including prices contributed directly by a major FX bank.

  Aftermath

  Streaming electronic pricing became an important feature of later foreign-exchange trading platforms.

  Source

1. 1Matchbook FXen.wikipedia.org