Month: October 2018

XTX Prepares for Life Post-Brexit

XTX Markets (XTX) has chosen Paris as its post Brexit European hub, although the firm says that its headquarters will remain in London.

XTX has filed an application with the Autorité de Contrôle Prudentiel et de Résolution, the French regulator, to operate a regulated firm in France.

In a release issued today announcing the decision, XTX says that is opening an office in Paris as part of its preparation for the UK’s exit from the European Union. The firms adds in the release that it is committed to maintaining and further developing its liquidity provision to clients, platforms and exchanges across the European Union.

In the FICC of It

In this week’s podcast, Galen Stops lights the blue touchpaper and steps back to watch the fireworks by asking Colin Lambert about not only the Benchmark Fix, more specifically the research paper published this week, but last look as well following the news that a regional regulator is investigating the practice. Just to add to the mix, he also gets him going on another Lambert favourite, tracking error.
They also discuss the FX Global Code and fintechs and ask, ‘should they be adhering and signing up to the Code?’ and Lambert shares some reader feedback on this week’s opinion piece on FX options brokerage.

Survey Finds Increasing Support for CBDCs

A new survey from the Official Monetary and Financial Institutions Forum (OMFIF) and IBM finds increasing support for central bank issued digital currencies (CBDC).
OMFIF describes itself as “an independent think tank for central banking, economic policy and public investment” and says the new report describes potential use cases for central banks to support central bank digital currencies.
A CBDC is a digital form of fiat money, which is a currency established as money by government regulation. It differs from digital currencies, which are not issued by the state and lack the regulations of a government.

StanChart Survey Finds Democrat House Win Priced In

A survey conducted by Standard Chartered Bank, both internally and among its client base, finds that a “small” Democratic House win is “well priced in” to markets ahead of the poll next month.
“A Democratic win was associated with weaker equities, lower bond yields and weaker DXY, with a stronger Democratic win exacerbating the moves,” the bank says in a release detailing the results. “A Republican win was associated with stronger equities, higher bond yields and a somewhat stronger DXY.”

Knowledge is Power

FX liquidity providers that use technology and data analytical tools are becoming more powerful in FX markets, but liquidity consumers are becoming better informed.

The role of data and the empowerment it brings FX market participants was a key theme of the first panel looking at liquidity at Profit & Loss Forex Network Chicago. Panellists agreed that generally speaking, liquidity in FX markets is fine, there is always a price; however, the question liquidity consumers need to ask is: “How high is that price?”

Cartel Members Acquitted of FX Market Manipulation

Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, have been found not guilty of FX market manipulation by a jury in New York.

It was alleged that between 2007 and 2013 Usher, Ramchandani and Ashton worked in coordination to fix prices and rig EUR/USD markets, participating in telephone calls and electronic messages, including near-daily conversations in a private electronic chat room, in order to achieve this. The indictment against them was issued in January of this year.

If found guilty the three could have each faced a maximum penalty of 10 years in prison and a $1 million fine.

Eurex Makes FX Clearing Play

Eurex Clearing has announced plans to expand its Partnership Programme to cover the repo and OTC foreign exchange segments.
The business, which is owned by Deutsche Borse, says the design of the programme extension is complementary to the OTC interest rate derivatives segment, which started in January 2018. As part of its partnership programme Eurex Clearing “shares governance and economics with the most active programme participants”, meaning it is a profit sharing scheme.The new FX segment of the programme is designed to deliver the benefits of clearing to OTC FX markets, which are still largely uncleared today, the firm says.

And Another Thing…

I absolutely get the value in data – more importantly, I absolutely get the potential for data in our markets. However (and who didn’t know that was coming?) it should not become the only driver of analysis. This week’s research paper on the 4pm Benchmark Fix does a great job of empirically analysing the changes and their impact on the mechanism, but, to my mind, fails to take into account how the changes corrected an existing imbalance that needed redressing for the overall wellbeing of the market.

Edgewater: Making a Play in LatAm

Edgewater Markets recently hosted an event in Lima, Peru, to celebrate the continued roll out of its new LatamFX.Pro platform. Galen Stops attended the event and sat down with the firm’s senior management to discuss why they’re making such a strong push in Latin America.

n a nutshell, the central thesis behind Edgewater Market’s Latam strategy is that their technology can be used to convert the NDF market into an NDF trading platform and thereby enabling local market participants to aggregate, consume and distribute FX rates more efficiently.

ASIC to Investigate Last Look

The Australian Securities and Investments Commission (ASIC) is to further investigate the use of last look in foreign exchange markets.
ASIC commissioner Cathy Armour told a conference this week that while the regulator accepts that last look may help facilitate a liquidity provider’s legitimate risk management, it also introduces the potential to exploit confidential client trading intentions and to otherwise treat clients unfairly.
The regulator says it will also conduct more sets of on site reviews of local banks’ foreign exchange businesses.