Margin trading platform race gathers pace

Last year, Deutsche Bank and ABN Amro went live with their platforms, dbfx and marketindex, having teamed up with online trading companies FXCM and Oanda. Meanwhile, Barclays Capital has been linked to Chicago-based ADM Investor Services.

And it seems others are set to follow, with UBS understood to be progressing with plans to launch a platform this year. Market sources say the Swiss bank has ditched plans to build its own platform with Dublin-based technology vendor Cognotec, following the fiasco revealed at the start of the year.

Instead, the bank is understood to be following in the footsteps of Dutch rival ABN Amro by partnering with Oanda to release a platform. Ultimately, this would make sense, with many banks failing to realise the back-end customer support and marketing required when launching a retail margin trading platform.

Let's not forget that these are slightly less sophisticated investors that will need more technical support than traditional clients of wholesale banks. One of the deliberations that took place at Saxo Bank when rolling out its algorithmic trading tool for retail clients, for example, was whether to host the product on a separate server so the bank could access the trading models when required by the clients for support. It was decided that the need for support outweighed potential concerns over privacy by clients.

While it is understood that UBS will target semi-professional traders, having this customer support catered for as part of a deal with an existing online trading company familiar with the client base would be a plus.

In some respects, one has to credit Oanda with some of the advances the company has made. Not only has it enabled trading in 38 currency pairs, including all major crosses and exotics, it has now also got support for other emerging market currencies such as Chinese yuan and Indian rupee versus the US dollar. Bearing in mind the huge growth markets that China and India represent, this sounds like it could be a pretty good deal for UBS. But that's assuming all conflicts between the investment bank, wealth management and private banking arms are resolved.

UBS declined to comment, while Oanda did not respond by press time.

Saima Farooqi, Editor