Yes, we’re still flogging the horse because it is now time for the final Irrational of 2017, my Person of the Year.

Previous winners of this Accolade have been pretty easy to select, but 2017 was a little harder – because let’s be honest, when everyone is obsessed with MiFID II it’s going to be hard to stand out isn’t it? Had someone managed to extract FX from this ridiculous regulation (in FX terms I should stress, because in the spirit of the season I don’t give two stuffs about equities or fixed income) then they would have been a standout winner, but that magician did not emerge so we are left with mere mortals.

I remain passionate about the FX industry and I like to see it in others, therefore I did consider naming someone who has a similar passion, namely Isaac Lieberman, founder of Aston Capital.

Sadly there were only about 300 of you in New York last year to witness the Profit & Loss Debate in which Isaac took on the might of David Mercer, CEO of LMAX Exchange, in a debate over last look. I must confess I didn’t agree with Isaac and thought some of his arguments were a little specious, but there was no mistaking the passion and belief in his argument and the result was a fantastically entertaining 30 minutes (in which D Mercer held his own I have to stress).

The story now moves onto this year and is told through the words of my colleague Galen Stops, who called Isaac to say we were putting on another debate.

“I’m in,” said Isaac, without even enquiring about the subject matter.

This alone, demonstrates his passion for debate and pushing the industry forward, but what followed was even better. Galen told him the subject matter and the side we wanted him to argue, at which point Isaac said, “That’s great – I actually believe that!”

This all suggests to me a man wanting to discuss any and all aspects of the FX industry and it is this type of debate we need if we are to continue to evolve. I have to say it also suggests a man after my own heart – for it has often been said of me that I will argue against a speaker, even if I agree with them. As my mother used to say, “you could start an argument in an empty room.”

There is method to this, however, because if we don’t question things, then how do we improve? A debate should be just that – two or more opinions helping to form what is commonly known as “conventional wisdom”, and in Isaac Lieberman, the FX industry has someone who is keen to be part of that evolution.

Sadly, however, I cannot in all consciousness give an Accolade to someone for being like me (and yes, I do realise I am now arguing with myself in print), so I had to cast my net elsewhere.

I did consider all members of the GFXC collectively for pushing through a sensible re-write of Principle 17 of the FX Global Code, but my sources tell me the decision was far from universally supported by all those involved and I would hate to give an Accolade to someone who supported last look!

Luckily enough, last look has indirectly given me my Person of the Year, but sadly, whilst I think I know the name, I cannot be sure and therefore they have to remain anonymous.

I groaned when I first saw the latest fine handed down by the New York Department of Financial Services for malpractice in a bank’s FX business – this time Credit Suisse – and the first few pages only served to deepen my gloom. As I read on, however, and came to the section on the alleged wrongdoings around last look, my mood brightened.

These reports typically focus on bad things done by a few and therefore rarely, if ever mention the many fundamentally decent people in industry, however the DFS report highlighted internal dissent over the use of last look (and this was in 2008 so long before it was a controversial issue in anything other than my own mind).

My 2017 Person of the Year is the person named by the DFS as Credit Suisse’s “former head of e-commerce”. This person stated, “Tightening P&L pressure should never be a cause for reversing matters of principle”, when discussing a proposal to deploy last look as a profit function – the original “free option” everyone talks about.

I should also recognise a “leader on e-FX development team” who stressed how last look was introduced for a very specific purpose – to stop latency arbitrage – and argued that if the bank was at all uncomfortable with a full and frank disclosure of the new policy it should be proceeded with.

The head of e-commerce also wrote, according to the DFS report, “Last look rejections have a slipperiness to them that understandably engenders distrust in some clients…[Being explicit with the client] is the best way to diminish the sense that we’re engaging in sharp/shady practice and I’d encourage a policy of continuing openness and honesty, to the extent that this is deployed.”

In other words, in spite of the image portrayed by certain media outlets that the FX industry was populated by a bunch of cowboys looking to rip everyone off, here is living proof of what most of us know to be the silent majority in FX. Someone who acts in an ethical fashion, is open and transparent, and is fair to their clients.

I don’t hold that service providers should give everything away to customers, they need to earn a crust as well and the more people that are comfortable with this the better. Liquidity is not, as some would have us believe, a bottomless well, it is valuable and should be more respected than it is by those who use it (and, if they are abusing last look, by those providing it!)

How I read my Person of the Year’s comments was they were stressing the need for last look to protect against certain counterparties, but it should not be a profit centre in its own right and the bank should be totally transparent with its customers over its use.

This, to all intents and purposes, is an expression of what the FX Global Code promotes, and not just in last look, but was argued years before we saw the need for such a Code.

It is not an exaggeration to say that over the past three or four years my faith in my belief that the FX industry is fundamentally an honest one has been shaken (but never broken), so I find it tremendously heartening to see evidence of that honesty. It shows that taking the right approach need not damage profitability; hopefully that decent clients respect honesty and will continue to trade with you; and that it is OK to raise a dissenting voice.

All I can say then to my anonymous recipient is “thank you” on behalf of all of us in FX who believe in doing the right thing – hopefully in the Global Code era, this type of behaviour will become the norm.

Twitter @lamboPnL

Twitter @Profit_and_Loss

Colin Lambert

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