Electronic Broking Services
Encyclopedia
Electronic Broking Services (EBS) is a wholesale electronic trading platform
used to trade foreign exchange
(FX) with market making
bank
s. It was originally created as a partnership by a number of the worlds largest banks and is now part of the ICAP (company)
.
(FX) market making
bank
s in 1990 to challenge Reuters
' threatened monopoly
in interbank spot foreign exchange
and provide effective competition. By 2007, approximately USD
164 billion in spot
foreign exchange transaction, 0.3 million oz
in gold
and 1 million oz in silver
as well as 200,000 ounces of Platinum and Pladium were traded every day over the EBS Spot Dealing System.
EBS's closest competitor was Reuters Dealing 3000
Spot Matching (aka D2 or D3). The decision by an FX trader whether to use EBS or Reuters D2
is driven largely by currency pair
. In practice, EBS is the primary trading venue for EUR/USD, USD/JPY, EUR/JPY, USD/CHF and EUR/CHF, and Reuters D2 is the primary trading venue for all other interbank currency pairs. It's worth noting that the currency pairs trade
d on EBS account for the bulk of the spot interbank market
.
EBS was the first organisation to facilitate orderly black box or algorithmic trading
in spot FX, through an application programming interface
(API). By 2007 this accounted for 60% of all EBS flow.
EBS was acquired by ICAP
, the world’s largest interdealer broker, in June 2006. ICAP said that the acquisition would combine EBS’ strengths in electronic spot foreign exchange with ICAP’s Electronic Broking business to create a single global multi-product business with further growth potential and significant economies of scale
. It went on to say that would provide customers with more efficient electronic trade execution, reduced integration costs and give access to broad liquidity across a wide product range.
Electronic trading platform
In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes products such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a...
used to trade foreign exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
(FX) with market making
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s. It was originally created as a partnership by a number of the worlds largest banks and is now part of the ICAP (company)
ICAP (company)
ICAP plc is a UK based voice and electronic dealer broker and provider of post trade risk services, the largest in the world carrying out transactions for financial institutions rather than private individuals...
.
History
EBS was created by a partnership of the world's largest foreign exchangeForeign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
(FX) market making
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s in 1990 to challenge Reuters
Reuters
Reuters is a news agency headquartered in New York City. Until 2008 the Reuters news agency formed part of a British independent company, Reuters Group plc, which was also a provider of financial market data...
' threatened monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
in interbank spot foreign exchange
Foreign exchange spot trading
A spot foreign exchange transaction, also known as FX spot, is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the spot date...
and provide effective competition. By 2007, approximately USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
164 billion in spot
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...
foreign exchange transaction, 0.3 million oz
Ounce
The ounce is a unit of mass with several definitions, the most commonly used of which are equal to approximately 28 grams. The ounce is used in a number of different systems, including various systems of mass that form part of the imperial and United States customary systems...
in gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and 1 million oz in silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
as well as 200,000 ounces of Platinum and Pladium were traded every day over the EBS Spot Dealing System.
EBS's closest competitor was Reuters Dealing 3000
Reuters 3000 Xtra
Reuters 3000 Xtra is an electronic trading platform typically used by professional traders and investment analysts in trading rooms. It provides real time streaming price date on exchange traded stocks, warrants, options, futures, indices, bonds, commodities and foreign currencies as well...
Spot Matching (aka D2 or D3). The decision by an FX trader whether to use EBS or Reuters D2
D2000-2
D2000-2 was a software system designed by Reuters for Foreign exchange trading.This automated electronic trading system allowed a dealer to enter buy and/or sell prices directly into the system, thereby avoiding the need for a human broker...
is driven largely by currency pair
Currency pair
A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency or quote currency and the currency that is quoted in relation is called the base...
. In practice, EBS is the primary trading venue for EUR/USD, USD/JPY, EUR/JPY, USD/CHF and EUR/CHF, and Reuters D2 is the primary trading venue for all other interbank currency pairs. It's worth noting that the currency pairs trade
Pairs trade
The pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy...
d on EBS account for the bulk of the spot interbank market
Interbank market
The interbank market is the top-level foreign exchange market where banks exchange different currencies. The banks can either deal with one another directly, or through electronic brokering platforms. The Electronic Broking Services and Thomson Reuters Dealing 3000 Xtra are the two competitors in...
.
EBS was the first organisation to facilitate orderly black box or algorithmic trading
Algorithmic trading
In electronic financial markets, algorithmic trading or automated trading, also known as algo trading, black-box trading or robo trading, is the use of electronic platforms for entering trading orders with an algorithm deciding on aspects of the order such as the timing, price, or quantity of the...
in spot FX, through an application programming interface
Application programming interface
An application programming interface is a source code based specification intended to be used as an interface by software components to communicate with each other...
(API). By 2007 this accounted for 60% of all EBS flow.
EBS was acquired by ICAP
ICAP (company)
ICAP plc is a UK based voice and electronic dealer broker and provider of post trade risk services, the largest in the world carrying out transactions for financial institutions rather than private individuals...
, the world’s largest interdealer broker, in June 2006. ICAP said that the acquisition would combine EBS’ strengths in electronic spot foreign exchange with ICAP’s Electronic Broking business to create a single global multi-product business with further growth potential and significant economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
. It went on to say that would provide customers with more efficient electronic trade execution, reduced integration costs and give access to broad liquidity across a wide product range.
Structure
The EBS solutions portfolio includes:- EBS Spot (electronic FX spot broking)
- EBS Spot Ai (application program interface (API) between the customer’s trading system and the EBS Spot market)
- EBS Prime (access for the interbank and professional trading communities to the best EBS Spot prices from an EBS Prime bank)
- EBS Metals (electronic spot broking for the precious metals market)
- EBS Live (live streaming prices delivered with minimum latency direct from EBS to the customer's market data distribution platform)
- EBS Ticker (third-party system distribution of EBS Spot prices)
- EBS Rates (desktop view of EBS Spot prices, available exclusively through the BLOOMBERG PROFESSIONALBloomberg TerminalThe Bloomberg Terminal is a computer system provided by Bloomberg L.P. that enables financial professionals to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data movements and place trades on the electronic trading platform...
service)
- EBS Data Mine (unique and certified historical data from 1997 onwards)