Barclays Starts Currency Trading Service For Private Clients

Tom Burroughes

2 May 2008

Barclays Stockbrokers is the latest financial firm to launch a service that taps private client interest in making money from currency trading. The brokerage unit of UK banking group Barclays has set up a leveraged spot foreign exchange trading service which uses the Barclays Capital's trading system, BARX, for 19 of the world’s most liquid currency pairs – such as euro-dollar and dollar-yen. The internet-based service will go live in the next few weeks following a period of testing. Would-be clients will be able to try out demonstration accounts before trading actual sums of money. Once an actual account is opened, clients' money is held in a separate account. Barclays says its spot-trading facility breaks new ground in giving clients access to the high liquidity, market expertise and technological know-how provided via Barclays group companies, such as Barclays Capital, its investment banking arm. To sign up, clients must make trades worth at least £1,000 ($2,000); Barclays Stockbrokers earns revenue from the bid/offer price spreads carried on the platform. Through the use of leverage, an investor can obtain exposure 100 times the cash deposited. But when an investor’s exposure reaches 90 per cent, the trade is automatically closed to avoid the investor losing his entire stake, Barclays Stockbrokers said. Investors keen to find alternative sources of return to volatile equity markets prompted the launch of the new trading platform, Tom Ryan, head of proposition at the broker, told WealthBriefing. Investors can also trade currency markets through spread betting and contracts for difference via brokers such as IG Index. Spot trading in forex is, however, still dominated by banks, hedge funds and other professionals. Forex markets produce an estimated daily turnover around the world of $3.6 trillion. Research among 500 investors commissioned by Barclays Stockbrokers shows that more than a quarter of respondents, at 26 per cent, surveyed are looking to trade forex in the future with 16 per cent already trading this asset class. During the past three years, the retail forex market has expanded rapidly, with a 70 per cent increase in monthly trading volume. The brokerage has worked closely with Barclays Capital, the investment banking arm of Barclays, exploiting the latter’s access to liquid markets, technological support and financial expertise in the forex sector, Mr Ryan said. “FX spot trading has moved from the exclusive domain of the institutional trading desk to the active trader’s laptop in line with the increased sophistication of the private client community,” he said.