D2000-2

~ the obituary ~

D2000-2, sold as Reuters Dealing 2000-2, went live in April 1992 and did something the foreign exchange market had never had. It matched trades by itself. A dealer typed a bid or an offer into the terminal, the system tracked the best bid and the lowest ask, and when two sides lined up it put them together. There was no broker on a phone anywhere in that sequence.

It had ancestry. Reuters had been in those dealing rooms since 1981 with the original Dealing service, and in 1987 it shipped a product called D2000 that carried indicative prices, meaning numbers you could look at but not trade on. The 2000 generation split the job in two. D2000-1 handled direct dealing, which is two named counterparties conversing over a terminal instead of a telephone. D2000-2 handled anonymous matching, which is the part that eliminated the broker.

Spot currency is the biggest market there is, and for a short period in the early nineties a single news agency in London owned the machine that cleared a large share of it. That position lasted about eighteen months.

~ the case file ~

~ the customers built the competitor ~

The banks whose dealers were typing into those terminals noticed what the arrangement implied. If one vendor operates the matching engine for the entire interbank market, that vendor sets the price of access forever. So a group of the largest market-making banks put their own money into a venture whose stated purpose was to counter Reuters, and in September 1993 Electronic Broking Services went live. In Tokyo the Japanese banks had already launched Minex that April on the same reasoning. EBS bought Minex in December 1995 and took Asia with it.

What followed was a split that still holds. EBS won the euro-dollar and dollar-yen flow, Reuters kept sterling and a long tail of crosses, and neither could dislodge the other. Reuters replaced D2000-2 with Dealing 3000, and the older system was retired in 1999. Much of its functionality went straight into the successor rather than being thrown away.

~ what it looked like ~

This is one of the few dead trading systems that got studied properly while it was alive. Researchers obtained the D2000-2 transaction record and published on it, which is why the microstructure of a 1990s dealing room survives as data rather than as anecdote. You can read what the spreads did and how quickly a quote died.

In April 1992 I was eight years old and six years away from my first modem. Nothing about this product touched an ordinary person in any country, then or since, which is part of why it is worth a marker. The market it automated is the largest in the world by volume and almost nobody has seen its screens.

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