Month: June 2017

FCA Holds Off Retail Rule Change as ESMA Considers Stronger Intervention

Following an announcement from the European Securities and Markets Authority (ESMA) that it is considering exercising its product intervention powers to address its concerns over the use of contracts for difference (CFD), rolling spot FX and binary options contracts by retail traders, the UK’s Financial Conduct Authority (FCA) says it will delay its own rules on the products.
In a statement, ESMA says it has been concerned about the provision of speculative products such as CFDs, rolling spot FX and binary options to retail investors for a “considerable period of time” and has conducted ongoing monitoring and supervisory convergence work in this area.

CFTC in First Non-Prosecution Agreements with Former Citi Traders

The US Commodity Futures Trading Commission (CFTC) has for the first time entered into non-prosecution agreements with subjects of an official investigation into misconduct.
The CFTC says it has signed the agreements with three former Citi traders, Jeremy Lao, Daniel Liao, and Shlomo Salant thanks mainly to what it terms their “timely and substantial cooperation, immediate willingness to accept responsibility for their misconduct, material assistance provided to the CFTC’s investigation of Citigroup, and the absence of a history of prior misconduct.”

FSB Sees Derivatives Reform Progress: But More Needed

The Financial Stability Board (FSB) has published three reports looking at the ongoing derivatives markets reform process and while the news is broadly positive the FSB says there is still more progress needed on trade repositories (TRs).
A summary of the papers will be delivered to the G20 heads at the upcoming Hamburg meeting – the reform process started in September 2009 at the Pittsburgh G20 summit.
The latest reports find that implementation of the reforms is now well progressed, although this has taken longer than originally intended due to the scale and complexity of the reforms and other challenges.

Barclays Names Zorzoli as Macro Distribution Head

Barclays has appointed Filippo Zorzoli as head of macro distribution for EMEA and Asia Pacific.

In addition, Filippo will also be head of solutions sales globally. He starts at Barclays in September 2017 and will be based in London.

Barclays’ macro business is part of its investment bank, helping both institutional and corporate clients trade FX and interest rate products. The macro team works in close partnership with Barclays’ research team, which publishes daily insight for clients on global macroeconomic and political issues.

New Study Highlights Buy Side Mifid II Concerns

A new study by consultancy firm JWG shows that 90% of buy side firms believe they are at either high or medium risk of not being compliant with the Mifid II rules when they come into effect in January 2018.

Among respondents to the survey, about one-third had less than £1 billion of assets under management (AUM), one-third had between £5 billion and £50 billion AUM and the remaining one-third had between £50 billion and £500 billion AUM. However, the level of preparedness was not found to be dependent on the size of the firm.

Former Deutsche Director Joins Wells Fargo

Sandra Francisco has joined Wells Fargo as a director, according to market sources.

Francisco joins from Deutsche Bank, where she was a director, focused on prime brokerage sales, FX hedge fund sales and derivatives clearing.

Prior to joining Deutsche in 2008, she worked for over seven years as a vice president at Goldman Sachs, focused on credit sales and prime brokerage sales. Both her Deutsche and Goldman roles were based in New York.

Giancarlo Nomination Proceeds to the Senate

The US Senate Committee on Agriculture, Nutrition, and Forestry has voted to confirm the nomination of Christopher Giancarlo as chairman for the US Commodity Futures Trading Commission (CFTC).

He has served as acting chairman since January, and today’s vote paves the way for his nomination to move forward to consideration on the Senate floor.

After the vote, Giancarlo issued the following statement: “I am humbled by the bipartisan support in the Senate Agriculture Committee for my nomination as chairman of the CFTC, and I look forward to consideration by the full Senate.

New Paper Challenges the Perception of Bank Liquidity in FX

A new research note from Pragma Securities is seeking to challenge the perception that banks are increasingly stepping back from providing liquidity to FX markets.
The firm notes in the paper that the “typical narrative” is that? reduced appetite for risk, controls on ?capital at banks, as well as juniorisation of dealer staff have all contributed to this withdrawal that led to an “increased fragility of the FX markets”. The paper adds that the general consensus seems ?to be that liquidity is getting more expensive, and while spreads are? narrow in times of normal volatility, in? times of market stress dealers effectively pull away from the markets, contributing to extreme volatility and events like flash crashes. ?

Is Active Currency Management Making a Comeback?

A new report finds that institutional investors are taking a more active approach to managing portfolio-wide currency risks, and in particular there is a greater appetite for active currency overlays.
The report, by investment analytics firm bfinance, says this change is being driven by divergence in European and US interest rates, geopolitical unrest and greater scrutiny of costs.
The report also recommends investors look beyond the headline fees and look closer at transaction costs, stating, “Although front-end fees receive column inches, transaction costs have been the subject of serious reappraisal from investors and regulators alike. The days of prop trading scandals may have ended; the days of investors accessing more cost-efficient trading are only just beginning.”

And Another Thing…

The starting point for this column has to be the observation that, by and large, foreign exchange dealers do like a moan. Let’s face it, we’re a bunch of whingers and the events of the past week – thanks to flip-flopping central bankers – have only reinforced this trait. Are we, however, looking at things the wrong way? Markets undoubtedly adjust quicker to events than they used to, but is there an opportunity for traders in this? I happen to think there is.