Some of the most innovative ideas which lead to new ways of conducting business can take time to catch on.

Markets, companies and individuals have to adapt to such concepts and feel comfortable that they stand to gain more than they could possibly lose once a new process is implemented.

Bermuda-based Forexster Ltd. is at the forefront of what its management feels is a revolutionary change in foreign exchange dealing, based on using cutting-edge technology. Forexster is an application service provider of a sophisticated suite of online foreign exchange dealing solutions, and for founder and chairman Arman Glodjo, addressing the fear of change within the market has been part of his mission for the last four years. He has also been thinking of other innovative ways to apply the technology, from trading insurance risk in new ways to supporting trades of environmental emission credits.

?Some ideas seem so right that they just need to be done,? he says. ?The whole idea of Forexster that I had five years ago here in Bermuda was just one of those moments when the underlying mathematics, the underlying economics, market efficiencies, the reality of the world called for this thing to be done.?

The ?thing? in question is foreign exchange dealing software and network architecture that provides banks using Forexster applications with the ability to link their systems together seamlessly. Using Forexster?s network dealing, each institution can and enable its customers to reach expanded pools of liquidity while preserving their counter-party relationships, that is, the customers dealings with their primary banks or prime brokers.

Mr. Glodjo ? whose credentials include a double major degree in Mathematics and Physics, two Masters degrees (Applied Mathematics and Electrical and Computer Engineering; Computer Science) and a doctorate in Finance from Duke University ? has previously applied his mathematical brilliance to the world of high finance as a trader and hedge fund manager, and he saw a unique opportunity to increase efficiencies in foreign exchange trading.

?People typically see efficiency in terms of better pricing but efficiency is much deeper than that,? he says. ?Rational expectation theory talks about efficiency in terms of relaying information between points, and the speed at which market mechanisms disseminate information is efficiency, it?s not just whether the price is better than A or B.?

With this in mind, his vision was to create an open, interactive platform or environment where buyers and sellers could be matched easily and quickly in order to trade in currencies at the best price, but this needed to be achieved without compromising the customers? relationships with their primary banks or brokers.

?Under the current model the customer typically can only buy or sell from their primary bank or one bank removed, based on the extent of established lines of credit between institutions,? he says.

Building a central exchange to facilitate a more open trading platform was logistically not an option, and would also provide the spectre of disintermediation for the banks. Therefore Mr. Glodjo and his Forexster colleagues ? all fellow Duke graduates who comprise a formidable team of computer programming experts ? developed the specialised and highly sophisticated software application that is now available under license to banks and other financial institutions.

?What we didn?t want to do was to go to a bank and say ?We?ve built this programme, please put your customers on it?,? says Mr. Glodjo. ?What happens then is that you?re asking the bank not only to change the way they do their business, but now to disintermediate themselves from their customer; it took me a steep learning curve to learn that.

?We could not be a platform onto which banks put their customers, so we became a software company that sells software. We simply license the software to the banks and they put their customers on their own licensed application. It becomes their own dealing system. So from the point of view of any single bank all we are is a vendor of dealing systems for them to extend to their customers.?

However, according to Mr. Glodjo the Forexster application goes further than typical dealing systems since banks that take up licences for what the company calls a ?Forexster facility? benefit from an unprecedented level of functionality and flexibility.

?A dealing system typically has rules, there are certain rules that govern how people trade within the system,? he says. ?For example, the minute you have a central exchange everyone trading in it is governed by the same set of rules. So what makes one exchange different from another is technically these rules.?

Since banks are individual entities and operate in a similar way in terms of setting their own specific parameters for the dealing processes and services they extend to their customers, the Forexster application can be customised to suit an institution?s particular needs.

?Basically they can customise and create their own dealing system on the fly and programme the system through the Forexster Switchboard,? says Mr. Glodjo. ?No one has ever made a dealing system that morphs like this.?

The Forexster Switchboard allows financial institutions to configure their Forexster facility to create the exact type of service that they and their client base require. By enabling or disabling various types of order and credit bridging, the Switchboard can create either a sophisticated single-bank dealing system, efficient ?FX prime brokerage?-style dealing systems, or a network dealing system that seamlessly links banks that respectively have the Forexster licensed facility.

?And the truly different thing about that is that customers from those banks can buy and sell currency according the respective rules set by the banks for their clients,? Mr. Glodjo says, which means that the system can accommodate the individual trading rules set by banks within the network without hampering the flow of foreign exchange transactions that customers conduct between those banks.

?I view Forexster as a linking mechanism, we?re linking liquidity,? says Mr. Glodjo.

?Yes, we?re also able to give you a dealing system but we can also link into other systems according to the rules that govern them.?

The Forexster Switchboard also allows each institution to adjust credit limits to any of its Forexster trading counterparties, and to monitor in real time the available credit to or from any counterparty, which is updated instantly whenever any trade occurs on, or is reported to, Forexster.

Based on that information, the banks can also write custom programmes through the system which respond instantly to changes in clients? risk levels or to changes in the market risk of the institution itself.

From the customer standpoint, because the service is free and there is no need to invest in special terminals or pay subscription fees, they can seek better pricing for their trades and the facility provides a one-stop-shop for credit management.

?They can also integrate liquidity that is available to them (from banks that do not have the Forexster facility) on the fly on the application if they deal electronically with those banks over their own dealing systems,? Mr. Glodjo says.

?Without those banks being part of Forexster their liquidity can be aggregated and presented in a customised view on screen. So it?s all in one place for the customer, they don?t have to have twenty screens; basically you?re just assimilating liquidity, it?s almost like we?re the Borg!? he says, displaying some Star Trek humour.

The application became available to the market on March 2 and is already being used by Bear, Stearns Forex Inc. the wholly-owned foreign exchange trading subsidiary of the investment banking and brokerage group the Bear Stearns Companies, which was the first company to sign up for Forexster.

Mr. Glodjo has been resident in Bermuda for ten years and says the Island is a natural base for developing ideas such as the Forexster application, given the general environment of innovation in the commercial sector here, particularly in terms of the insurance market.

?My creativity goes through the roof here and my family and I have a spiritual connection with Bermuda,? he says. ?From the business perspective this is an island that claims to be the centre of the world as far as insurance is concerned; they can be the centre of the world as far as underwriting the risk of exchange in the world accordingly.

?That?s why I hope I can make some contribution to Bermuda.?