"The Dealing 2000-2 Spot India CUG is an extension to the Dealing 2000-01. While the Dealing 2000-1 offers conversation-based dialing facility, the Dealing 2000-2 offers an electronic matching system, which is the technologically improved version of 2000-1," Fedai stated.

Nearly $300 million worth of deals in the interbank foreign exchange market are put through forex brokers daily. Charges for deals are pegged by Fedai, and are substantialy higher than the flat $3,000 dollar thatReuters is to charge subscribers for its service, which, once operationalised, will wipe out the thus far captive business of traditional forex brokers.

The powerful forex brokers' body comprising Kanji Pitamber & Co, Mecklai & Mecklai, FR Ratnakar & Co and Vrajlal Thakkar & Co have taken a strong exception to Reuters' Dealing 2000-1 Spot India CUG alleging that Reuters is stepping into their preserve by offering broking services in violation of extant Fedai norms by classifying its interface as a "match-making one".

Reuters India Pvt Ltd managing director John Atkinson said, "Reuters is currently in discussions with various authorities regarding the possible launch of Dealing 2000-2 in India. If we launch the system, it will be for the benefit of the market and should introduce both transparency and efficiency to the market. Needless to say, should we launch the system, we will comply with all relevant regulations in India."

However, Kanji Pitamber & Co partner and Beba chairman countered: "Reuters hasall along said that it is only offering match-making, and not broking services in India. Having managed to convince Fedai on this matter, Reuters can very well claim that it will comply with all relevant regulations."

Beba is now expected to activate legal measures through Udwadia, Udeshi, Desai, Berjis & Chinoy as notwithstanding Fedai's stance, both FSA and the WMBA have, in their communication with the broker's association, made it explicitly clear that Reuters is a broker on account of extending services via its Dealing 2000-2, thereby adding a new twist to the controversy.

Atkinson did not respond to queries on FSA and WMBA views, but Reuters and its closest international rival, Electronic Broking Services (EBS), are regarded as "brokers" for supervisory purposes by the FSA in the United Kingdom. "The decision to regulate electronic brokers reflects their importance in the foreign exchange market and their position as direct competitors to `voice brokers'," says FSA in its communication withBeba.

Responsibility for supervision of money market brokers was earlier vested with the Bank of England, but since June 1 this year, it has been transferred to FSA. By agreement, the FSA supervises both Reuters and EBS on the same basis as conventional ``voice brokers'' who have to satisfy conditions under the Financial Services Act (1986), and comply with provisions in the London Code of Conduct.

Similarly, Reuters Transaction Services Ltd (RTSL), the Reuters' subsidiary that markets and operates the Dealing 2000-2, foreign exchange matching systems in the United Kingdom, is a member of WMBA. Though a WMBA membership is not compulsory, both Reuters and EBS are its members.

On the controversy raging over Reuters offering here in the country, WMBA chairman Michael Beales said: "The operation of Reuters matching systems in other centres (including Mumbai) is franchised to local companies. I do find it strange that the Mumbai company thinks that their matching service does not constitute broking. TheLondon market clearly feels otherwise."