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About GAIN: News & Events |
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On-Line FX Trading For Pros
Derivatives Strategy, February 01, 2000
Mark Galant wanted a name that was easy to remember. "A trader thinks about making capital gains, so this is GAIN Capital," he says. "Also, the symbolism of the word gain-it's a very positive feeling."
Indeed it is, and Galant, the founder and CEO of Warren, N.J. based GAIN Capital, is hoping to spread that positive feeling among his future clients. His market making firm, the latest entry into the on-line foreign exchange mart, will throw open its door next month to small hedge funds, commodity trading advisers and savvy individuals. The goal: to be the Schwab of the foreign exchange market by offering fast, efficient service and 5 basis point spreads.
At $1.5 trillion in transactions per day, the global currency markets are 30 times larger than the U.S. equity market. Investment banks have diligently pursued large corporates and hedge funds, and have made it easy and efficient for them to trade, but further down the pecking order service tends to fall off and spreads widen.
During the past few years, a number of on-line firms have tried to fill that void. Galant, however, looks askance at the security and dealing practices of many of these firms. Some, he argues, give a customer a quote and, if the customer tries to buy or sell, say the market has moved away and requote. Another très dubious practice is firms knowing their customers' position and adjusting prices based on whether they're long or short.
GAIN intends to eliminate this double decker problem by injecting a stiff dose of professionalism into the market. It will offer live quotes that are instantaneously dealable and will give everyone the same quote at the same time. Galant also plans to staff his firm with professional traders from the Street, which will help deepen liquidity for customers. "Even when the market is moving," he says, "we're going to make these 5 pip or less prices, because the kind of traders I have aren't scared of moving markets. They're used to trading much bigger size at the largest banks, and making the kind of size quotes we're looking at-anywhere from $100,000 to $10 million-doesn't faze them in any shape or form."
GAIN will commence trading the six main U.S. dollar currency pairs with two 12 hour shifts of four traders each, plus a head trader. Later in the year, the company plans to switch to three shifts and add the major crosses and, eventually, additional currencies. GAIN's Java based software, designed "with the eminent idea of speed," will offer customers instantaneous feedback on their fills and positions, and P/Ls will be updated instantly. To trade, customers put down the requisite margin money and get 50 to 1 leverage. There are no fees or commissions on transactions.
GAIN will offer customers interbank quality spreads, says Galant, and will make money the way the banks do-by capturing a large volume of spreads. "You can make a lot of money for a firm with 5 basis point spreads, if you have good traders and you get significant deal flow," he says. "So one of the things I want, obviously, is to get as many people trading with us as possible."
Galant, former vice chairman at FNX Ltd., had been global head of options trading for Credit Suisse First Boston in the early 1990s, and ran the foreign exchange options group at Chemical New York before that.
GAIN has an additional, unexpected ace up its sleeve: its location in the Turnpike state. A lot of traders evidently do not live in TriBeCa, and therefore don't like the hour and 15 minute commute into the city-or wearing a suit. "Having a 10 minute commute, a casual dress code and a relaxed atmosphere has been a big draw for us in recruiting traders," notes Galant.
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Overview