As someone who grew up with – and still adheres to – the “what goes on tour stays on tour” ethos, I have no particular problem with certain events that have apparently been happening “off piste” in our industry. As the subject was quite high on everyone’s agenda last week in London, I very quickly found myself in a minority of one – as everyone else (who work for major institutions it might be added) appraised me of the realities of the current world where one has to be seen to be behaving at all times.
That’s as maybe, but what was interesting was where the conversation went, which was to “where is the best place in the industry to work?” Of course I immediately stated the claim for Profit & Loss, but funnily enough I again found myself in a minority of one! Personally I thought it a bit harsh when my colleagues voted for P&L, but only when I was in Australia.
The crux of the matter came down to what part of the industry is likely to see the best growth in the coming months/year. This was actually the second time I had been involved in this type of conversation in just a few days. I was actually asked the question, “what is the next big growth area in FX?” My answer was – and this is bound to attract the ire of those of who feel I can be a little negative on occasion (I prefer realist myself) – I am not sure there will be growth in FX turnover over the next year.
Looking across the segments, some high frequency firms are starting to feel the pinch as they find themselves trapped between a banking industry that does not want to go out of its way to help them and other high frequency firms that are fighting with them for ever-reducing margins. Effectively, I argued, HFT is eating itself. It is being forced onto venues where it interacts with the last people it wants to interact with – other high frequency firms.
So I saw little growth there, nor did I in the “real economy” flows as global trade continues to drag and investment managers still tiptoe around the issue of hedging currency exposures. Elsewhere, retail may see continued growth, but I can’t see it actually making a huge difference to the overall market, and bank-to-bank trading wll suffer along with the reduction in real economy flows.
How gloomy is all that? Well actually it should not be taken that way, for my impression is that we are at a plateau here and that we are going to see what is probably an inevitable pullback in volumes. Over the past five years volumes have gone through the roof and the pace of growth was unsustainable, it just so happens that 2011 is the year when the industry pauses for breath.
I remain a long-term bull on the FX market, the fact is it is different to others, it fulfils a basic function of the global economy. We may not be seeing the stellar growth in both turnover and revenues of the past few years but it remains a great business to be in.
And the vote for best place to work? Well it seems to be a certain US institution, but if you work there, don’t rock the boat…