Month: September 2017

Hotspot Commits to Global FX Code

Hotspot says it has aligned its activities across its global business with the principles of the FX Global Code, issuing a statement of commitment today. 

Following a comprehensive internal review, Hotspot says that its business practices, procedures, compliance framework and disclosure standards have been augmented to fully reflect the Code’s principles, as published in May 2017.

The platform has also conducted a series of customer meetings to clarify how Hotspot’s adherence will impact them and their business. These efforts, which started over a year ago and developed as the Code’s drafting progressed, will remain a focus for Hotspot as adoption of the Code increases across the FX community and as its usage starts to further inform industry behaviour.

NEX Markets Launches NEX Quant Analytics

NEX Markets has launched a new suite of analytical tools on its EBS FX trading platform that seeks to match the sophistication levels of those available at banks and trading firms, however at market level.
NEX Quant Analytics was launched today and uses benchmark data taken from the entire EBS ecosystem. It delivers “real and measurable” insight for clients into their own trading activities and the ability to look at their performance versus that of their peers.
With execution quality taking a more prominent role in FX market participants’ thinking, especially around their market impact, the timing would appear to be good for the firm.

What Makes a Good FXPB Client?

It’s a valid question to ask FXPBs what constitutes a “good” client these days. Post-Basel III, firms taking big positions in non-spot products are going to consume vastly more balance sheet and capital than a firm trading only spot in smaller amounts, which can easily be serviced with a relatively little net open position (NOP).

This obviously suggests that, for example, an HFT deploying a spot-only strategy could potentially be a more attractive business proposition than a large macro fund trading longdated NDFs or options products.

However, speaking to a number of FXPBs, it immediately becomes apparent that such a view is too simplistic. One FXPB head says that this basic analysis is correct, but only assuming a legacy pricing model, which is derived primarily by frequency and size of transaction activity.

SGX Achieves FX Record

Singapore Exchange (SGX) has announced a new daily volume record for its SGX INR/USD futures contract.
The exchange says it handled a total of 108,417 contracts on 22 September 2017, translating to a notional value of $3.34 billion. The INR/USD is SGX’s most actively traded FX futures contract, and recent volume growth has extended its market share to more than 40%, SGX adds.
SGX also recorded its highest ever daily volume for its USD/CNH on 8 September 2017, with 25,857 contracts traded.

What Makes a Good FXPB Provider?

In a recent survey by Profit & Loss, 29% of respondents cited balance sheet strength as the most important factor when selecting a prime service provider. Meanwhile, 19.9% said that pricing was the most important factor and 14.5% said that the technology available at the prime service provider was the key motivator when selecting a prime.

The product range offered and the existing relationship with the prime provider were both picked as the most important factor by 13% of respondents. Only 3% said that the leverage available is the most vital consideration in a prime service provider. Meanwhile, 7.6% of respondents chose to specify alternative priorities when selecting a prime service provider, and some of their comments are illuminating.

New Paper Advocates for Managed Futures

Portfolios that include managed futures funds perform better and reduce more risk than those without them, according to research jointly published by the Alternative Investment Management Association (AIMA) and Societe Generale.

The paper, titled ‘Riding the Wave’, analysed the risk and return profiles of investment portfolios including and excluding managed futures funds from 2000-2016. 

For example, it showed the performance of a traditional asset mix of 60% bonds and 40% equities is enhanced with the addition of CTA strategies, which may increase the return and risk-adjusted returns (by lowering the volatility), as well as considerably lowering and shortening drawdowns.

The FX Tape, What’s Different This Time Round?

The consolidated tape for FX launched by FastMatch today looks very different to the one initially proposed by its CEO, Dmitri Galinov. Galen Stops takes a look at what’s changed.

FastMatch has today announced plans to launch a consolidated tape for FX, something that its CEO, Dmitri Galinov, has been working towards for some time.

Profit & Loss previously reported on an earlier proposed iteration of this tape back in May 2016, but the one launched today looks significantly different.

FastMatch Launches FX Consolidated Tape

FastMatch has launched a consolidated tape for FX in a bid to bring more transparency to the market.

Speaking exclusively to Profit & Loss about the new venture, FastMatch CEO, Dmitri Galinov, explains that any type of FX market participant is welcome to contribute to the new tape, subject to certain stipulations.

The first such condition is that there is a minimum requirement of $2 billion per day in notional volume for those wishing to contribute to the tape. Contributors must also sign a contract with FastMatch confirming that they own the rights to the trades that they are submitting to the tape and agreeing to independent audits of the trades being submitted. 

FXPB: What Does the Global Code of Conduct Say?

“Prime Brokerage Participants should strive to monitor and control trading permissions and credit provision in Real Time at all stages of transactions in a manner consistent with the profile of their activity in the market to reduce risk to all parties.” – Principle 41

Prime Brokerage Participants should strive to develop and/or implement robust control systems that include the timely allocation, monitoring, amendment, and/or termination of credit limits and permissions and adequately manage associated risks.

• Prime Brokerage Clients should strive for Real-Time monitoring of their available lines and permitted transaction types and tenors so that only trades within permitted parameters are executed.

The Global Code: Back to the Future

When I joined a US investment bank in London as a graduate trainee in 1969, it was explained to me that they did not actually have a graduate programme nor were they particularly interested in the economics and politics that I had spent three years studying.

I had been hired because I had a sound education and they believed, after several interviews, that I had the qualities of honesty and integrity that they insisted on for all employees, at all levels of job function and experience.