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A Last Look at Last Look? There is one area of the Global Code of Conduct that continues to attract controversy, and, Colin Lambert says, we all know what it is… Although the assessment is a little harsh given the type of misconduct that led to the creation of the FX Global Code of Conduct, it is hard not to understand where the head of e-FX trading at a major bank in London is coming from when they note, “The Code had one job – give us clarity on last look – and it has failed miserably.” There remains the odd voice still raising concerns about Principle 11 and its apparent endorsement of pre-hedging, however, Guy Debelle, chair of the FX Working Group that created the Code, stresses this Principle is really about the “demonstration effect”.
A New Dawn? May 25 marks the release of the full FX Global Code of Conduct, an event that has been much anticipated in FX circles. What will the Code bring to the FX industry and what are the key changes likely to be experienced by participants? Colin Lambert finds out. It all starts – and to a degree ends – with Annex Three, which sits at the end of one of the more important documents released in the FX industry. A lot has been debated and speculated over as the FX Code of Conduct has been developed by the Bank for International Settlements’ FX Working Group
Sucden Targets Growth Through Diversity Following the launch of Sucden Financial’s new OTC FX options service, Galen Stops talks to Noel Singh, head of e-FX business development at the brokerage, about how it’s planning to diversify its FX offering. Despite having an FX franchise that is over 30 years old, an e-FX offering that has been around for more than eight years and a balance sheet of over $100 million, Sucden Financial is not exactly a household name in the wholesale FX market. But the firm is now working to change that as it seeks to diversify its FX business in response to changing market conditions.
CME Europe, What Went Wrong? Six years after launching CME Clearing Europe and three years after launching CME Europe, the Chicago-based exchange group has announced that it will shut both operations at the end of this year. Although the move was something of a surprise, Galen Stops discovers there are some compelling reasons why the initiative failed. He asks what went wrong and what does this move mean for CME's remaining European operations as well as the ongoing efforts by its competitors to get a European FX derivatives business off the ground?
CTA Performance: Decline or Dip? Galen Stops looks at why CTA strategies struggled in 2016, examines why there is enthusiasm from these managers bubbling up for 2017 and looks at the trends that are shaping the managed futures industry. 2016 wasn’t exactly a vintage year for CTAs. The SocGen Prime Services SG CTA Index ended the year in negative territory for the first time since 2012, showing returns of -2.89%. Likewise, the BarclayHedge CTA Index was -1.14% for the year. One explanation for why these firms struggled was the continued low interest rate environment, which has kept bond prices low and helped drive up the stock market.
Questions, Questions, Questions FXCM has known its share of controversy in recent years and now the firm has been barred from operating in the US. Profit and Loss staff report on an issue that has triggered another round of introspection in the FX industry. Just over two years after staving off bankruptcy due to losses resulting from the Swiss National Bank’s decision to unpeg the Swiss franc, FXCM has been forced to withdraw from operating in the US, changed its name and seen its two principals step down from the business. The unravelling of FXCM has impacted across the FX industry with questions being asked around the effectiveness of self-regulation, how the Global Code of Conduct could deal with a repeat offence, and how the industry moves forward in an atmosphere of mistrust?
Last Men Standing FXCM’s forced exit from the US leaves only two major retail OTC FX-focused brokerages in the market. Galen Stops talks to the CEOs of these firms about what this means for the industry. “The retail foreign exchange market has suffered a less than exemplary reputation for some time now,” concedes Vatsa Narasimha, CEO of Oanda. The latest blow to the industry’s reputation comes as the US Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) concluded that FXCM had defrauded its US customers, ordering it to withdraw from doing business in the country and fining the firm and its founding partners a total of $7 million.
FXCM: The Other Side of the Story The FX industry has, by and large, been swift and united in its condemnation of the actions of FXCM, for which the firm was banned from the US and fined $7 million for defrauding FX customers. But, as they say, there are always two sides to every story and so Profit & Loss has been talking to various market sources that provide different perspectives on this case. This is challenging because as part of the legal agreements between FXCM and the Commodity Futures Trading Commission (CFTC), the firm neither denied nor admitted the allegations against it, and therefore cannot speak to the press about the issue.
The DNA of a Flash Crash A new paper uses trade repository data to forensically analyse the Swiss franc de-pegging and while Colin Lambert finds its conclusions are familiar, the paper offers other insights The story is familiar to anyone in the foreign exchange business – on January 15, 2015, the Swiss National Bank shocked the markets with the announcement it was abandoning its Swiss franc ceiling to the euro at 1.2000. Chaos ensued as EUR/CHF collapsed over 40% before recovering sharply, after which the industry was left to rake over the ashes of what was to many a debacle.
The Reality Check Much has been made of the sharp drop in spot FX volumes in the recent BIS Turnover Survey, but, Colin Lambert asks, is what we are seeing merely a return to a longer term trend? A regular theme in Profit & Loss over the past two years has been, since the traumatic events of January 15, 2015 around the Swiss franc peg, the return to relationship trading at the expense of the all-to-all model. Analysis and data recently released by the Bank for International Settlements based upon its recent Triennial Central Bank Survey of FX Turnover appears to support the notion that the FX market is losing its infatuation with market share at all costs and is much more choosy about who it deals with.