Month: June 2018

Using Data to Generate Alpha Signals

Charles Ellis, a trader and quantitative strategist at Mediolanum Asset Management, explains how data can be used to help generate alpha signals.

The first thing that Ellis points out is how trading firms can most effectively use data is dependent on their investment process and the type of research questions they are trying to use the data to answer.

For starters, he says, firms need to consider what investment time frame they are working towards.

“Then you have to ask which of these time frames can we add the most value to? What data do we have access to? And then it goes into what sort of questions can we answer using this data over these time frames?” comments Ellis.
 

Global FXC Names Leadership Team, Reports on Progress

The Global Foreign Exchange Committee has named Simon Potter executive vice president of the Federal Reserve Bank of New York, as chair for a one-year term. At its meeting this week in Johannesburg, it also nominated and elected Adrian Boehler, global co-head of FXLM and commodity derivatives at BNP Paribas, and Akira Hoshino, senior fellow and managing director, head of global markets trading at MUFG Bank, to serve together as co-vice chairs for a two-year term.
Speaking to Profit & Loss after what Potter says was a very productive meeting, he is keen to stress the diversity and engagement represented by the GFXC.

And Another Thing…

The FX industry is a vibrant, innovative place, but sometimes I think it forgets why it exists. This amnesia means as an industry, FX does not respond sufficiently on those occasions when people with no understanding of the nuances of the business suggest “improvements”.
So many news threads running through the industry at the moment seem to be idealising a totally transparent, all-to-all trading environment. This works in domesticated markets like equities, but it doesn’t work in global, institutional markets like FX – especially when we remember why we are here.

OTCXN Completes Test Trade Between Fiat, Cryptocurrency

OTC Exchange Network (OTCXN), a blockchain-powered capital markets infrastructure company, today announced that it completed its first live test trades for the exchange of tokenised fiat currency and bitcoin.

The infrastructure provider says that it believes this to be the first time that tokenised US dollars and tokenised bitcoin have been exchanges between two separate trading accounts over an electronic trading platform with assets held in safekeeping at a neutral custodian and digitised on blockchain.

Currently, institutional traders usually conduct block trades of fiat currency and cryptocurrency over e-mail and chat, relying on the reputation and credibility of their counterparties to honor their part of the trades, often taking hours to confirm and settle. The OTCXN platform aims to remove trading counterparty and settlement risk with an atomic exchange of assets on high-performance blockchain and facilitates settlement of transactions instantly, not in hours or days.

Ardizzone Joins Mercury Exchange

Matt Ardizzone has joined Mercury Exchange, a new digital asset exchange, as head of liquidity and relationship management.
Mercury Exchange is set to launch in Q4, delivering what it terms an industrial strength exchange focused on the institutional market.
Most recently Ardizzone was global head of FX sales at RJO’Brien, and prior to that held several senior and leadership positions at Nomura and Jefferies Bache (formerly Prudential Bache).
The firm says he will draw on his expertise to develop deep liquidity and build out the institutional platform at Mercury Exchange.

Cobalt Unveils Its New Credit Platform

Cobalt, the shared back and middle office FX infrastructure provider, has unveiled its new credit management platform.

One of the issues that this credit engine attempts to solve for the market is the challenge faced by credit providers. Over the last ten years the number of prime brokers in the FX market has shrunk, in part because the risk of suffering a major loss from a defaulting client has in some cases failed to justify returns.

According to Cobalt, this risk is driven by the inability to allocate and manage credit at FX trading venues in real-time, meaning the party with the credit risk is often the last to know. By enabling central real-time credit management, the Cobalt claims that its platform overcomes these issues entirely.

FX Brokerage Announces Raft of Senior Hires

DeepWell Liquidity Management, a London-based agency broker, has added seven senior market professionals to its team across three continents as it eyes growth and expansion into different asset classes.

Launched in September 2017 as a subsidiary of Tradition, DeepWell offers global coverage across a range of OTC and exchange-traded FX products, including spot, forwards, options and futures.

The broker says that it has experienced high demand for its bespoke service from buy-side institutions and investors since launch, and now employs 15 staff members across Europe, Americas and Asia Pacific. The new hires will be based in London, New York, Singapore and Sydney.

BNY Mellon Takes the Next Step in Its FX Build-Out

Key to the announcement made today by BNY Mellon that it is launching an FX options desk is that the bank believes that this represents the next step in its transition to a “full-service” FX franchise.

“We’re transitioning from a custody FX business to a more traditional full-service FX provider,” Adam Vos, global head of FX at BNY Mellon Markets, tells Profit & Loss. “As such, FX options was a key deliverable along this journey because it means that we can now meet more of our
client’s trading and hedging demands. It’s very important that they no longer have to go somewhere else for this activity, they can trade options – as well as other products – directly with us.”

BNY Mellon Launches FX Options Trading

BNY Mellon has launched its FX options desk, enabling clients to better hedge currency exposure and express their views on the future direction of FX markets.
The bank says that clients now have access to a full-service currency trading desk, offering spot, forwards, non-deliverable forwards as well as options. “This offering complements an existing suite of broader FX services including FX custody, payments and hedging,” it adds.
Options represent the latest step in a broad build out of BNY Mellon’s FX business – the bank has made a series of senior hires over the past two years and in January announced plans to launch an FX prime brokerage service.

Associations Publish Global Benchmark Report

The International Swaps and Derivatives Association (ISDA), the Association of Financial Markets in Europe (AFME), International Capital Market Association (ICMA) and the Securities Industry and Financial Markets Association (SIFMA) and its asset management group (SIFMA AMG) have published a new report that assesses the issues involved with benchmark reform, and makes recommendations on steps firms can take to prepare for the transition from interbank offered rates (IBORs) to alternative risk-free rates (RFRs).
The report, which was based on a survey of 150 banks, end users, infrastructures and law firms in 24 countries, shows a gap between high levels of awareness of benchmark reform and concrete steps being taken to transition from the IBORs to alternative RFRs.