Day: November 9, 2016

How Will the Election Change the US Regulatory Landscape?

As FX markets continue to anticipate what will happen next following Donald Trump’s surprise victory in the US Presidential election, there could also be significant changes in the country’s regulatory landscape that financial services firms need to consider.

For starters, the Commodity Futures Trading Commission (CFTC) could look very different.

Historically, when there’s a transition of parties, the Chairman of the Commission has tendered their resignation on the inauguration day of the new President and then the remaining Commissioners vote amongst themselves for an acting chairman.

“Hound of Hounslow” Faces the Kennel

In what is being seen as a surprise move, Navinder Singh Sarao, the UK-based day trader accused by US authorities of spoofing markets and contributing to the May 2010 flash crash in US equities, has pleaded guilty in a US court appearance following his extradition from the UK.
Sarao, nicknamed the “hound of Hounslow” because he operated at times from a bedroom in his parents’ house in that London suburb, was extradited after being accused of making almost $40 million by entering large bids and offers against his intended trading direction on CME stock futures.

ACI Replaces Member on MPG, but Ex-President Stays

Sources familiar with the matter say that David Woolcock is joining the Market Practitioners Group (MPG) sub-committee of the BIS Working Group.
The MPG, under the stewardship of CLS’s David Puth, is helping to develop the Global Code of Conduct for FX markets. The work started in mid-2015 in response to the series of scandals that rocked FX markets and the completed Code is due for delivery in six months’ time.
Woolcock is chair of ACI – The Financial Markets Association’s Committee for Professionalism (CFP), the committee that originally created and manages ACI’s Model Code.

US Elections: After the Panic

“Following the US election, global markets have reacted in predictable panic. Equity markets [and] the dollar sold off and gold rallied,” notes Kerim Derhalli, CEO of invstr.

Profit & Loss previously reported on the immediate aftermath of the surprise US election victory for Donald Trump, but the question facing markets now is: what next?

“Key will be now whether or not Trump will prove to be a populist or a pragmatic president,” says Valentijn Nieuwenhuijzen, chief strategist and head of multi-asset at NN Investment Partners.

Dollar Lower as Trump Wins US Election

In a result that was not seen by pollsters or markets, Donald Trump has, according to US networks, won the US presidential election.
As results came in through the night and the swing to Trump became apparent, equity index futures were crushed, Japan’s Nikkei Index at one stage being 1000 points down, and the US dollar was hit hard as part of a “risk off” trade.
USD/MXN, the bellwether pair for the election, dropped to 18.1650 in trading soon after polls closed as exit polls predicted a Clinton victory, however as Trump crept up in the polls the pair jumped higher, ultimately hitting a high 20.77 – a fall for the peso of 14.3%. The fall in the peso prompted Mexican authorities to call an emergency meeting to discuss their response to the financial fall out from the election.

CLS Upgrades Members to New Gateway

CLS Group has completed its project to upgrade its settlement members to a new member gateway and market infrastructure (MI) channel.
CLS’s settlement members include 66 of the world’s largest financial institutions, which are direct participants in CLS. Over 21,000 third-party clients around the world also access CLS’s services indirectly through settlement members
The group says that it worked with each of its settlement members, as well as Swift, to build and integrate a new member gateway into each bank’s core architecture.

Thinking Big

Carlo Koelzer, CEO of 360T Group and global head of FX at Deutsche Bo?rse Group, talks to Galen Stops about the importance of building critical mass amidst the changing landscape of the FX market.

Galen Stops: It’s now about one year on from Deutsche Bo?rse’s acquisition of 360T. Can you shed some light about why you agreed to the deal?

Carlo Koelzer: Prior to this deal we were a big trading platform in the market, but a small organisation in comparison to our competitors. When you look at the larger platforms in the market they’re backed by firms like Icap, Thomson Reuters, Bloomberg and State Street, all of whom had larger balance sheets than us.

Study: US Corporates Hedging Less FX Exposures

A recent study from Chatham Financial finds that less US corporates are hedging their currency, interest rate and commodity risk exposures than three years ago.
The study, which analyses the 2015 financial risk management practices of more than 1,500 publicly listed corporations in the US, found that the number of overall companies utilising currency and commodity hedges fell three percent from 2012 to 37% last year.
It also found that only 55% of firms with exposure to currency risk actively manage this risk through the use of financial hedges.

Volumes High, Spreads Holding Up as US Election Uncertainty Grows

Sources are reporting “very high” volumes in FX markets as uncertainty over the outcome of the US election increases.
With some polls still open in the US the financial markets have swung 180 degrees from expectations of a Hilary Clinton victory towards “too close to call” and in some cases a Donald Trump win.
The growing shock of the pollsters once again getting it wrong has seen USD/MXN – the benchmark for the election as far as FX markets are concerned, sky-rocketing almost 12% from 18.30 to 20.48. The impact has been felt elsewhere with USD/JPY dropping sharply from above 105.50 to 101.50 and EUR/USD rising from 1.10 to 1.1231.

Random FX Volatility Characterises Early Returns in US Election

As polls in eastern states closed the FX market has seen some whippy price action, however according to dealers spreads remain reasonable.
USD/MXN, widely seen as the bellwether of the election outcome, has whipped around, from 18.30 when polls closed it has hit a high of 18.44 and a low of 18.1650 and was, ironically, last trading at 18.30. “The market is keying on Florida,” an Asian-based trader tells Profit & Loss. “It looks tight but you can track the updates by the moves in USD/MXN.”