Yes, looks like the Lava product will also target hedge funds but has a "hidden" facility so that the banks can trade between themselves!
Why don't large banks want open market? What is the significant gain from trading between themselves? Thanks insiders in advance, I am learning a lot here...
I guess they gain from trading with the retail clients at prices that are better for the bank than interbank prices. If interbank opens for retail, clients will go to the market and get the best prices rather than going to a single bank (or group of banks that post prices on a retail platform like IB IDEALPRO) and get a price which includes the bank's commision.
Why dont banks want open market.. liquidity/spread/money making...banks dont want clients to be knowledable about where the fx market rates are because that means they cant take a spread...remove the ability for a forex desk to take spreads and they lose the ability to make money...that means they have to go back to the old days and actually take positions in the FX markets based on knowldedge and feel, rather than front running... Whats the advantage to trade amongst themselves.....one is impact on rate...if you have $400mio eur.usd to sell and can match it off without market slippage then you save money... Also it makes the rest of the fx market think they are missing something if all this liquidity is apparently being traded between the top 5 banks..btw as we all begin to trade with each other what will they have left to cover between themselves? just their own prop ..and will they want to give that info out to their competitors by trading with them...I doubt it...
The purpose of a centralized currency exchange is not just liquidity. It is regulatory power and a credible threat (and actual pursuit) of international criminal prosecution for cheating. The facts that the banks really don't want it sounds like a great reason there needs to be one. I'm also sure that banks really don't want regulatory control and independent valuation of bank reserves and loan quality, but we have it, fortunately.
So, how's living under a rock? http://www.elitetrader.com/vb/showthread.php?s=&threadid=68520 http://www.elitetrader.com/vb/showthread.php?s=&threadid=68513