It has always driven me a little nuts when I ask about a firm’s strategy going forward and am told something along the lines of, “We listen to our clients – new products and services are driven by client demand”.
Yes, of course, a service provider that does not listen doesn't last long, but I have always argued superior service is about anticipating client demands, not reacting to it, and the story of CME Europe may be a case in point.
How ironic is it, when the same US president that accuses just about everybody else of being a "currency manipulator", decides he wants to talk the dollar down? About as Ironic as the Swiss minister who this week claimed that Switzerland was not a currency manipulator - this in spite of the Swiss National Bank telling everyone it bought 66 yards of EUR/CHF in 2016. Perhaps it was short covering, I don't know. Either way, what happens in FX markets when everyone is trying to manipulate?
The latest suggestion I am hearing is that the UK's Senior Managers' Regime will be implemented and monitored by the technology teams at the banks. This sounds like a decent idea, but what doesn't is the perception that this means the heads of those tech teams will be responsible for anything going wrong. It may sound a reasonable business decision but, in my opinion, it absolutely smacks of people playing silly games and seeking to avoid responsibility by passing the buck.
Although I have never really bought the argument, there does seem to be a consensus in the FX industry that fragmentation has been a good thing. There appears to be another consensus building in the industry that it needs a complete technology reboot - in the most extreme circumstances people call for an entire rebuild, a more modest plan calls for focus on specific areas. If both arguments are correct, proponents will probably not be happy to hear me call for less fragmentation in any reboot.
Thankfully, and we accept no payment for this enormous service to the industry, at last week’s Forex Network London conference, former Citi FX head James Bindler and I solved the problem of last look.
Those of you that were there already know this, of course, and, equally clearly, it’s not my idea in any shape or form – I’m just jumping on the coat tails of other brighter people! That said, a solution, more importantly, a potentially workable solution, does exist.
Naturally, when I thought about a column highlighting an area in which I am concerned the foreign exchange industry is being less than totally transparent – in an operational sense – my first thought was a Kate Spade handbag. That my thought process then led to the film Under Siege 2 is, I will confess, a little concerning, but don't worry about it too much, because both are relevant.
After all, if we are selling anonymity, surely we should actually be providing it?
OTC versus the exchange. It’s a debate in foreign exchange that is almost as old as this oldest of markets. You’ve read the arguments and listened to the debates where the argument is driven by people passionate about their preferred mechanism, and still you can't make up your mind who makes the most sense.
So what should be the important drivers of this debate? What should our end goals be? Profit & Loss’s deputy editor Galen Stops may have found the answer…in Cuba.
There are many reasons given for the perceived decline in liquidity conditions in FX markets in recent years and all do play a role according to a new white paper published by the BIS. But have liquidity conditions changed that much? Hasn't it always been the case that when events happen markets gap and thin out?
If I am correct in this assessment then the real problem facing the FX industry is not deteriorating conditions – it's a sense of entitlement.
ACI’s explicit support for the FX Global Code helps plug an important gap in the Code's reach – for it moves its influence beyond the developed and major emerging markets and into some real local markets.
It is important that the Code reaches all market participants, so there are other gaps to be filled, not least the small private trading firms. Can we repeat the example of ACI to help reach these firms, as well as others that should be more aware of their responsibilities?
If the feedback to Monday’s column is anything to go by, I can confirm that last look remains a highly emotive issue in the foreign exchange industry. It will help though, if not only some people “take a chill pill” to calm what is a highly emotive debate, but also if they read the Global Code properly and, more pertinently, understand that market making is not a charity and often the client’s own execution style can contribute to market impact.