Northern Trust Takes Online FX Trading System Global

The Northern Trust Company in partnership with Reuters has released its foreign exchange trading system, FX Passport, to the foreign investment management community. Along with pricing and trading functionality, the Web-based application also provides Reuters news, Northern Trust market commentary and interactive chat rooms for money managers to pose questions to their peers. Patrick McDougal, executive vice president and director of global foreign exchange trading, says the European roll-out is slow-going because each country has particular legal stipulations for trading electronically, but it has already received a good deal of attention in London.

FX Passport is originally based on a Reuters foreign exchange dealing system, Deal Web, that has been customized for the money management community with input from Northern Trust. McDougal, who was looking for an online solution to provide Northern Trust's fund management clients, first approached Reuters two years ago to transform the dealing system into a broader based trading engine. Although Northern Trust served as development partner, Reuters is planning to resell the system throughout the money management community.

"I figure what we have here is something that could quite possibly become an industry standard," says McDougal. "If you're in business where you're doing a great deal of trades for your client base, you're not going to want this client base's business to be seen elsewhere. So having the neutrality of Reuters involved in this was important because they would be able to sell or lease the system to other financial institutions without any conflict of interest."

McDougal couldn't stress enough the importance of FX Passport being an online solution. "Instead of more hardware on your desk, it's an icon on your laptop or PC," McDougal explains. "The last thing portfolio managers need is another piece of hardware on their desk." He adds that the system has been well received in North America, where it was released last year.

Along with trading, the system goes a long way to automate and streamline post-trade processing. According to Philip Herndon, vice president and product manager at Northern Trust, the system will route trade confirmations online-thereby negating piles and piles of paper confirms-as well as allow investment managers to "block" trades, or parse a larger trade into various accounts. Currently, Herndon and his team are working with a few Northern Trust clients to streamline the movement of information between FX Passport and their investment management and accounting systems.McDougal declines to specify how much Northern Trust paid for the system or if it received a development partner.