Month: December 2017

Reuters Enhances MTF Ahead of MiFID II

Thomson Reuters has released into production, system enhancements to its Multilateral Trading Facility (MTF) to support FX derivatives trading in compliance with MiFID II regulations.

Thomson Reuters FXall and Forwards Matching users can now access liquidity on the MTF, which meets multiple MiFID II requirements relating to execution workflow, trading controls, post-trade transparency and reporting.  MiFID II takes effect on January 3, 2018. 

“We are extremely pleased to have reached the milestone of releasing the system enhancements into production to facilitate MiFID II compliance.  In parallel, Thomson Reuters continues to work very closely with our customers and regulators to ensure a smooth transition into the new regulatory environment,” says Neill Penney, global head of trading.  “As the implementation date approaches, we remain committed to continuing our approach of being a valued partner and advisor to our customers.”

And Another Thing…

With December in financial markets only livened by the shenanigans of bitcoin, including the launch of futures trading (complete with trading halts), it is time to unveil the next Irrational. It’s a favourite of mine, Analysis of the Year, and boy is this one competitive!
The easy option would be to pick out a few predictions that went horribly wrong and highlight them, but that would be unfair as we all get it wrong from time to time, just look at my Trade of the Year record in the Profit & Loss Crystal Ball!

No Surprises: Fed Raises Interest Rates Again

The US Federal Reserve raised interest rates for the third time this year on Wednesday, citing an improving economy and labour market.

At the end of the Federal Open Market Committee’s (FOMC) two-day meeting, it was announced that the benchmark interest rate would be increased by 25 basis points, to between 1.25% and 1.5%.

“In view of realised and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1?1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation,” said the FOMC in a statement today.

Deutsche Research Highlights FX Macro Struggles

New research from Deutsche Bank shows that returns from FX macro managers have dropped to their lowest levels since the 1980s, despite the fact that “there does not appear to be a structural decline in the excess returns available to FX investors”.

The Deutsche Bank Currency Index (dbCR), which captures the beta available in the FX market by following a simple carry, valuation and momentum strategy, is at -2% for the year, but is well within historical ranges.

Hence the assessment from George Saravelos, an FX strategist at Deutsche and author of the research note, that despite low volatility and uncertainty around key macro issues there doesn’t appear to be a structural decrease in potential FX returns.

MarketFactory Enables Bitcoin Trading Via its API

MarketFactory has announced today that FX market participants will be able to use its API, Whisperer, to trade bitcoin futures on the CME when they launch on December 18.

Additionally, Whisperer provides access to Bitcoin market data.

“Our Whisperer API and connectivity solution simplifies and reduces our clients’ technical cost of entry to new currency markets, and with that in mind, we are pleased to announce that BTC futures are already available to trade via our CME integration,” says Matt Whitaker, director of product management at MarketFactory.

UK Businesses Increase FX Hedging Ahead of Brexit

As UK businesses prepare for Brexit, small firms are managing their FX risk more and more as they look to increase trade internationally, and exporters forecast increased growth in FX turnover, according to a new report from East and Partners released this week.

Following interviews with 2,211 UK corporates, East and Partners has revealed that 25% of micro businesses and over 40% of SMEs used FX forwards in the second half of 2017, an increase of 16% and 15%, respectively, over the last six months. The report also shows that larger businesses are also using hedging options on a more regular basis, with nearly half indicating their use.

“Awareness and understanding around the benefits of FX risk management solutions has clearly hit home with UK small business, leading to record highs in its usage,” says Simon Kleine, business lead at East and Partners Europe.

Sustaining the Momentum

Since launching its initial suite of FX products four years ago, SGX has reported consistent growth in this business segment. But can the exchange sustain the momentum going forward? Reporting from Asia, Galen Stops takes a look.

Back in November 2013, Singapore Exchange (SGX) went live with trading for six deliverable and non-deliverable currency pairs: AUD/USD, AUD/JPY, USD/SGD, INR/USD, KRW/USD and KRW/JPY. As Profit & Loss noted at the time, the aim was clearly to establish SGX as the major hub for Asian currency futures trading.

Fast forward four years and it appears that the exchange is well on its way to achieving this ambition, with the star performers in its FX suite being the INR/USD and USD/CNH contracts, the latter of which was launched in 2014.

Vogel Joins TD Securities as Global FX Head

Chris Vogel, who left BlackRock in August after six years with the firm, has joined TD Securities as an executive managing director and global head of FX. He is based in New York. At BlackRock, Vogel was most recently managing director, global head of fixed income and currency trading and CEO for BlackRock Execution Services (BES). Vogel joined BlackRock as global head of FIC trading in 2011 and took on the additional role as CEO for BES in 2012. Since 2016, he served as global co-head of trading for the firm.

Bose Joins Goldman Sachs

Suv Bose has joined Goldman Sachs in New York as part of its G10 FX trading team.
He joins from Citi in New York where he also worked on the G10 FX trading desk – he joined the US bank in August 2010.

CTAs Continue Positive Monthly Performance

Following the improvement in performance in October, the Societe Generale Prime Services CTA Index continued its positive run as it was up +0.30% in November, increasing gains for the year to 1.77%.

Trend followers also made further gains, as the SG Trend Index posted the strongest performance in November, up +0.59% and now +0.75% for the year.

However, short-term strategies continued to face challenging market conditions and ended on average, down -1.07%, pushing losses this year to -6.23%. Performance was mixed across all CTA strategies, as approximately half of trend following, and non-trend CTA managers generated positive returns in November; and despite the dip in index performance, three out of the 10 short term strategies ended the month positive.