Day: 20 September 2017

Managed Futures See Marginal Gains in August

Managed futures traders gained 0.54% in August, according to the Barclay CTA Index compiled by BarclayHedge.

For the year, the index is still down 0.51%. “Geopolitical uncertainty had investors scurrying for the safety of sovereign bonds,” says Sol Waksman, founder and president of BarclayHedge.

“As Harvey advanced, Gulf Coast refineries sought safety. Refiners shut down and spot gasoline shortages propelled gasoline futures 28% higher in the closing days of the month.”

Five of the six sub-indices calculated by BarclayHedge recorded gains in August. Diversified (0.94%), systematic (+0.74%), discretionary (+0.28%), financial/metals (+0.17%) and currency (+0.02%) traders all gained. Agricultural traders were the only losing sector (-0.56%) of the month.

Kulkin Named Director of CFTC Division

The US Commodity Futures Trading Commission (CFTC) chairman Christopher Giancarlo has appointed Matthew Kulkin to serve as director of the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO).

Kulkin comes to the CFTC from the law firm Steptoe & Johnson, where, as a partner, he advised financial market participants on legislative and regulatory issues.

“I am pleased to welcome Matt to the commission,” says Giancarlo. “He comes with a wealth of knowledge on Dodd-Frank Act regulation and our derivatives market that will serve us well.”

FMSB Annual Report Highlights Progress made in FICC Reform

The UK’s FICC Markets Standard Board (FMSB) has issued its 2017 Annual Report setting out the progress it has made to enhance standards of behaviour in the wholesale fixed income, currencies and commodities markets.
FMSB was established in 2015 following the recommendations of the Fair and Effective Markets Review (FEMR), which was conducted by the Bank of England, the UK Treasury and the UK’s Financial Conduct Authority.
FMSB says it has achieved “significant momentum and has received strong support from market participants and public authorities”.

FXPB: Which Way is the Pendulum Swinging?

Over the past few years, some FX prime brokers have gone from aggressively competing for market share to off-boarding clients and increasing their fees. What happened to make the pendulum swing so dramatically, and is it due for another reversal? Galen Stops reports.

Relatively speaking, it wasn’t all that long ago that banks were aggressively trying to build out their FX prime brokerage (FXPB) businesses and competition was fierce. This precipitated a race to the bottom in terms of fees by some FXPBs. Numerous market sources claim that Morgan Stanley was at the forefront of this race, although they note that a number of major FXPB players were not far behind.

The Paradox of Prime

Prime brokerage has had an interesting relationship with the FX market – after the initial burst of excitement when it first launched in the late 1990s, the middle years of the first decade of this century saw a growing consensus that it was a good idea that had, had its day.

Generally speaking, PB customers were restricted to dealing on a bilateral basis with the major banks, so while there was undoubtedly some benefit involved, the value proposition wasn’t one that lent itself to continued growth.

Is TCA Just a Morality Carwash?

There has been a renewed focus on Transaction Cost Analysis (TCA) in recent years as buy side firms are becoming more savvy about how their execute their FX transactions and regulations such as Mifid II impose new best execution requirements.

But do market participants really know how to conduct effective TCA or is it just becoming a box ticking exercise designed to placate compliance staff, regulators and investors?

Banks are always quick to vouch for the accuracy and utility of their TCA reports, but can they be trusted to provide clients with an honest assessment of their own performance as a liquidity provider?