Month: 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?

Shah Tapped to Head G10 FX at BNP

Neehal Shah has joined BNP Paribas as global head of G10 FX trading with immediate effect. He will be based in London and report directly to Adrian Boehler, global co-head of FXLM and commodity derivatives.
Shah joins after 18 years at Deutsche Bank, where he held a number of senior positions including global head of currency options and complex risk trading, head of FX trading Americas and global head of FX investor sales. He was also global head of markets electronic sales, as well as a member of Deutsche’s Markets Electronic Trading Management Committee.

Shah to Head G10 FX at BNP Paribas

BNP Paribas has appointed Neehal Shah as its global head of G10 FX trading with immediate effect.
Shah will be based in London and report directly to Adrian Boehler, global co-head of FXLM and commodity derivatives.
Shah joins BNP Paribas after more than 18 years at Deutsche Bank, where he held a number of senior positions including global head of currency options and complex risk trading, head of FX trading Americas as well as global head of FX investor sales.

P&L Talk Series with John Betts

Profit & Loss talks to John Betts, CEO of Noble Bank International, about the demand for more innovation in FX and the potential impact of a shift towards real-time settlement.

John Betts: The fact that people are not just receptive to innovation but starting to demand it is a really good sign for the industry. I think previously everyone was too focused on the front office, but now there’s a recognition that the back office needs innovation too.

One challenge that I feel still exists, however, is that the back office is not something that’s very well understood, so when solutions are being proposed to back office problems it can be difficult for firms to distinguish between solutions that actually address these problems and ones that are shiny new objects that allow firms to tick an “innovation” box.

CLS to Launch Same-Day Settlement

CLS Group plans to launch a same-day settlement service in the second half of 2018, subject to regulatory approvals.

The new service, CLSNow, will offer bilateral, same-day, payment-versus-payment gross settlement in CAD, CHF, EUR, GBP and USD, with plans to extend the service to additional currencies in the future, based on client demand. The aim is to enable counterparties to optimise the use of available liquidity in the same-day market, while mitigating settlement risk.

Currently, some of CLS’s largest clients have in excess of 10% of their daily euro business being transacted on a same-day basis, and the expectation is that the launch of CLSNow will further facilitate the growth of this same-day market.