Banks join in foreign exchange venture
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Your support makes all the difference.FOURTEEN international banks have agreed to launch a foreign exchange clearing house in 1994, it will be announced today.
Echo (Exchange Clearing House Organisation) Netting is designed to reduce the costs of dealing on the foreign exchange markets substantially. It is also the first step towards rationalising the market, which has traditionally operated on a bilateral basis.
Under present arrangements banks, which might carry out 300 foreign exchange deals each day, pay for each transaction separately. As a result they make hundreds of payments to each other.
With Echo Netting they will be able to net off deals with other Echo members, substantially reducing the number of payments they have to make each day.
Insiders estimate it will save members thousands of pounds a day. Individuals cannot deal directly on the foreign exchange market.
Graham Duncan, Echo's chief executive-designate, says the system will also reduce risks substantially.
The banks supporting Echo include Barclays, Midland, Hongkong, Standard Chartered, ABN- AMRO, Banca Commerciale Italiana and Banque Nationale de Paris.
American banks are conspicuous by their absence from the list, though some were involved in initial negotiations.
Preparatory work has been held up by legal and regulatory difficulties. Both the Bank of England and the Bank for International Settlements have been consulted about Echo's plans.
Assuming regulatory approval, the banks plan to reduce the level of capital they commit to foreign exchange dealings.
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