FRAMINGHAM (03/08/2000) - Next week, international customers of London-based Barclays PLC will be able to trade currencies online, with foreign customers of discount broker Charles Schwab & Co. not far behind.
The service won't be available to U.S. customers anytime in the immediate future, however.
"We're targeting Canada as our first market," said Michael Durand, a spokesman for San Francisco-based Schwab. "The reason we're looking at international markets first is that's where we see the most immediate need for this capability."
According to Barclays spokesman Tim Johnson, U.S. customers have less need for foreign exchange trading.
But foreign investors using Schwab's online brokerage services will be able to use the online exchange to buy and sell securities in different foreign markets without the need to separately negotiate foreign exchange contracts (see announcement).
In addition, in countries where Schwab's affiliates are licensed to trade on local exchanges, the foreign exchange facility will allow customers to move funds between accounts valued in different currencies.
The service, called the FX facility, will be available to Schwab's international customers by the fourth quarter of this year.
The Internet-based currency trading system was developed at Barclays and is already in live demo, said Barclays project manager Andy Rowland.
Barclays was able to develop the system in four months, instead of the 9- to 12-month development cycle normally needed, since it was developed entirely using Java and XML-based technologies.
Based on Barclays' experience, Rowland said, the entire financial industry will soon be moving to the Java platform. "It's very fast, it's easy to maintain, it's rapid to develop, it's very thin and it doesn't require any software on the desktop, so it can be distributed in real time on the Internet."
Although many trading systems currently use 40 bits of encryption, Barclays' currency trading system uses 138 bits, said Rowland.
"Because of the nature of the transaction, we want to make sure it's as secure as you can get it," he said.