Matchbook FX was an internet-based

electronic communication network An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system accessed by an electronic trad ...

("ECN" or Electronic Trading Network) for trading

currency A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use within a specific envi ...

online in the Spot-FX or

foreign exchange market The foreign exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. By trading volume, ...

. It operated between 1999 and 2002.

History

Founded in 1999, Matchbook FX (sometimes referenced as "MatchbookFX", "MatchBook FX" or "Match-Book FX") was the world's first open and inclusive internet ECN for Foreign Exchange trading, available to all willing FX trading participants including hedge funds, CTAs, banks, corporations and, uniquely at the time, retail FX traders as well. Matchbook FX was initially conceived by Daniel Uslander, Ron Comerchero (commodity futures and equities traders) and Josh Levy (former

Goldman Sachs The Goldman Sachs Group, Inc. ( ) is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many internationa ...

FX trader) of the New York-based proprietary FX trading firm Valhalla Forex Inc, as well as Mark S Smith of the Florida-based equities-trading technology firm NexTrade ECN. Several months later, GlobalNetFinancial.com, a

NASDAQ The Nasdaq Stock Market (; National Association of Securities Dealers Automated Quotations) is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume, and ranked second on the list ...

-traded financial news and technology firm, bought in as the third major equity partner in the three-way joint venture. Matchbook FX was recognized in 2000 as one of ''

Silicon Alley Reporter ''Silicon Alley Reporter'' was an American trade publication focused on New York's Silicon Alley. Founded by Jason Calacanis in 1996, then was renamed the ''Venture Reporter'' in 2001 and was eventually sold to Dow Jones in 2003. Rafat Ali ser ...

'' Magazine's "12 to Watch", its annual listing featuring top internet companies.

Unique aspects

Prior to Matchbook FX, most FX trading was transacted mainly by phone or amongst large banks (such as

Chase Chase or CHASE may refer to: Businesses * Chase Bank, a national American financial institution * Chase UK, a British retail bank * Chase Aircraft (1943–1954), a defunct American aircraft manufacturer * Chase Coaches, a defunct bus operator in ...

UBS UBS Group AG (stylized simply as UBS) is a multinational investment bank and financial services firm founded and based in Switzerland, with headquarters in both Zurich and Basel. It holds a strong foothold in all major financial centres as the ...

Deutsche Bank Deutsche Bank AG (, ) is a Germany, German multinational Investment banking, investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Stock Exchange. ...

, or

Citibank Citibank, N.A. ("N. A." stands for "National bank (United States), National Association"; stylized as citibank) is the primary U.S. banking subsidiary of Citigroup, a financial services multinational corporation, multinational corporation. Ci ...

) in the "interbank market" or by phone between large banks and their multinational corporate clients (such as

IBM International Business Machines Corporation (using the trademark IBM), nicknamed Big Blue, is an American Multinational corporation, multinational technology company headquartered in Armonk, New York, and present in over 175 countries. It is ...

Intel Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California, and Delaware General Corporation Law, incorporated in Delaware. Intel designs, manufactures, and sells computer compo ...

Coca-Cola Coca-Cola, or Coke, is a cola soft drink manufactured by the Coca-Cola Company. In 2013, Coke products were sold in over 200 countries and territories worldwide, with consumers drinking more than 1.8 billion company beverage servings ...

, etc.) or institutional clients (such as

hedge funds A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to aim to improve investment performance and insulate returns from market risk. Among these portfolio techniq ...

pensions A pension (; ) is a fund into which amounts are paid regularly during an individual's working career, and from which periodic payments are made to support the person's retirement from work. A pension may be either a "defined benefit plan", wher ...

mutual funds A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe ('investmen ...

, and other asset managers). Matchbook FX's ECN approach was considered unique by market participants because of its stated aims to democratize the Foreign Exchange market by empowering all "

Buy side Buy-side is a term used in investment banking to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, hedge funds, and pension funds are the most c ...

" FX participants (including retail traders and institutions) to be, for the first time,

Market Makers A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the '' bid–ask spread'' or ''turn.'' Th ...

or Price Makers, instead of only

Price Takers In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...

. Matchbook FX functioned as an open limit order-book, also known as a Central Limit Order Book or CLOB – similar to an online exchange – where any participant subscribed to the network could either post its own bids and offers just like a

market maker A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the ''bid–ask spread'' or ''turn.'' Thi ...

, or immediately trade on any other existing bids and offers for a given currency. This process allowed users to join or better the prevailing prices in the network and thus directly impact (and tighten) the

bid–ask spread The bid–ask spread (also bid–offer or bid/ask and buy/sell in the case of a market maker) is the difference between the prices quoted (either by a single market maker or in a Order book (trading), limit order book) for an immediate sale (Ask ...

widths on which they traded. As such, Matchbook FX was considered to be one of the main catalysts that presaged rapid technological advances, sharp compressions in bid/ask spreads, and other sweeping changes into the currency market. Matchbook FX was the first e-FX trading platform to feature dynamic fully automated, executable streaming currency prices (as opposed to

Request for Quotation A request for quotation (RfQ) is a business process in which a company or public entity requests a quote from a supplier for the purchase of specific products or services. RfQ generally means the same thing as Call for bids (CfB) and Invitati ...

"RFQ" driven prices) contributed directly from a major FX bank (rumored to have been

). This configuration, which is now commonplace, was considered a technological innovation in 1999. As an ECN, MatchbookFX never carried market-risk or managed FX positions and thus was never subject to conflicts-of-interest with its users. Matchbook FX was the first major US-based FX dealer to voluntarily subject itself to NFA (

National Futures Association The National Futures Association (NFA) is the self-regulatory organization (SRO) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives ( swaps). NFA is headqu ...

) regulations. At the time of Matchbook FX's launch, a handful of other retail-focused online FX dealers existed, none of which were NFA regulated.

Final days

The implosion of the

dot-com bubble The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Interne ...

in 2000 severely hindered Matchbook FX's ability to raise continued operating funds. The stock price of GlobalNetFinancial.com (NASDAQ: GLBN), Matchbook FX's main financial backer, fell from a high of over $70 per share in 2000 to less than $1 per share by the end of 2001. By 2002, Matchbook FX was sold to a consortium of investors who made the decision to discontinue the Matchbook FX brand. Following Matchbook FX, other technology-driven FX trading operations emerged, including Hotspot FX (a Matchbook FX carbon-copy ECN), FXCM,

Gain Capital GAIN Capital Holdings, Inc. was a US-based provider of online trading services, headquartered in Warren, New Jersey until it was acquired by StoneX Group in 2020. The company provided market access and trade execution services in foreign exchan ...

Saxo Bank Saxo Bank is a Danish investment bank specializing in online trading and investment. Established in 1992 as a brokerage firm under the name ''Midas Fondsmæglerselskab'' (English: ''Midas Stockbroker Company'') by Lars Seier Christensen and Ki ...

, and

CMC Markets CMC Markets is a UK-based financial services company that offers online trading in shares, spread betting, contracts for difference (CFDs) and foreign exchange across world markets. CMC is headquartered in London, with hubs in Sydney and Singapor ...

References

{{Online brokerages Financial services companies established in 1999 Financial services companies disestablished in 2002 Online brokerages Stock market Foreign exchange companies Foreign exchange market Currency 1999 establishments in New York (state)