And so, after a long and tortuous journey through December –
at a time when the dollar has risen something like 5% in just a couple of weeks
(and a lot of traders missed the move because they pulled stumps until January)
– we come to the final Accolade of the year; my 2016 Person of the Year.
Last year I focused on the reform process because,
undoubtedly and as turned out, 2016 was very much that type of year. This year,
with a nod to the ongoing reform process around the impending launch of the
‘final’ Global Code of Conduct in May, I thought this award should very much
reflect the business side of the industry – for the success, or otherwise, of
FX will be driven by firms, both collectively and individually.
In such an environment, innovation is critical. I have
already written in these Accolades of the atmosphere of fear that exists in too
many institutions and the lack of incentive offered by too many firms for their
staff to think differently and, importantly, try new ideas.
Inevitably if we are talking about innovation we need to
talk FinTech, and we publish tomorrow a very good video interview with a runner
for my Person of the Year, David Mercer, CEO of LMAX Exchange, in which he
argues FinTech is an enabler, not a disruptor as so many believe.
Obviously being a little “old school” I tend to shy away
from the word “disruptor”, just as I do any other word or phrase that appears
to have emanated from the “clever speak” aura around business schools and media
relations firms. Equally, I struggle to come to terms with the phrase FinTech,
preferring to use a more accurate – and long-used – “start up”.
One thing that has struck me over the past couple of years
is that in spite of all the claims of disruption and innovation, the wheel has
not been reinvented in FX. It’s still about bids, offers, sellers and buyers.
As I am fond of saying on the ACI Australia Dealing Simulation Course, FX is
simple, you can do one of three things – sell, buy or nothing – and be one of
three things, long, short or square. That has not – and will not – change.
What has changed, of course, is how we trade FX and this is where I want to focus the Person of the
I have to confess I was severely tempted to highlight the
change by showing that video again
and nominating the maker – believed to be a former Swedbank FX trader – as
Person of the Year. If you want to see it again (and why wouldn’t you?) it can
be found here.
As someone who really appreciates engagement, the
aforementioned David Mercer was considered. I know many in the industry
disagree with David over last look in particular (I don’t as it happens) but
what cannot be denied is his passion and drive to make the market what he
considers to be a better place. If nothing else, people in this industry with a thoughtful opinion deserve (and indeed receive) much more respect than those who spout sales clichés.
Without wishing to disrespect a whole segment of our
industry (too much) when thinking of innovators, people willing to try new and, to some, brave ideas, one doesn’t look in the direction of the banks. Equally
while the tech stack is undoubtedly impressive, the business model of the
non-bank market maker is pretty much a more efficient, slimmed down version of
the bank e-business, so I tend to view that sector as an industry improver rather than innovator.
I pondered with the idea of joint winners in the form
of Pete Eggleston and Oliver Jerome at BestX. As a FinTech (I believe Pete
prefers referring to it as “RegTech”) BestX fits the bill and it’s a testament
to the founders’ reputation that so many people are willing to engage with them.Creating a buzz around a new venture is nothing new, but actually executing – and getting people talking spontaneously about it – is no small feat.
And while I am thinking of “different” winners there were a few
comments from readers that the generic Mrs Watanabe be given the award for the
Japanese retail sector’s contribution to FX markets in 2016. I suspect that
several of those proposing did so tongue in cheek (or because they made a huge
amount of money out of their Japanese retail client base). In all seriousness,
however, a lot of moves in FX this year that were hard to explain were either started or exacerbated by the Japanese retail industry.
For my winner, however, I have returned to the platform world
– a segment that saw some serious attrition of CEOs and other heads of business
over the past year.
I have always admired the entrepreneurial spirit and
probably the best example of this was how Barclays’ e-FX business won so many
awards for BARX (I would point out – whilst preening – that Profit & Loss was first to identify
BARX as a winner!) What I found stimulating about the BARX business in the
middle of the first decade of this century was how it tried things. There was
no following the safe option and I absolutely believe that it became a better
platform because of some of the
mistakes that were made.
It seems hard to believe that such an innovative spirit
existed in banks just a decade ago (Lehman Brothers was another innovative
thinker in e-FX…pity about the rest of the business!).
Thankfully I do see that spirit elsewhere in the industry –
nowhere more so than in the business run by my Person of the Year.
Transparency is a tricky issue in foreign exchange – for my
part I believe in total transparency of action and as little transparency
around order as possible! This puts me in opposition to my Person of the Year at least 50% of the time, for FastMatch CEO Dmitry Galinov is very much an
advocate of total transparency!
This award is not about whom I agree with all of the time,
however (that would be a very short
list), but about who I think tries to
make the industry a better place.
Last look remains a problem in foreign exchange and while in
an ideal world I would prefer it to be abolished I understand that is not going
to happen. If so the industry needs a solution to take any semblance of
controversy out of what will always be a controversial process.
Step forward FastMatch with its LSP order type, effectively
an order that outsources last look to the platform and ensures everyone knows
there is an independent and neutral overseer of the detested rejection process.
Not only is this a brilliant idea, but in some ways it is a brave one because
the platform is risking having clients of all types turn on it if they lose
money (it will of course be nothing to do with the platform but when have
traders ever accepted the blame?)
Talk to people in the industry and they profess admiration
for the tech skills of FastMatch and how ideas are turned around quickly – on
one occasion apparently when the idea generator, my source for this
anecdote, was just thinking out loud and was bemused to be presented with a
working solution just a week later!
The other headline ‘act’ by FastMatch in 2016-17 was/will be
the Tape. As someone who has long campaigned for a few simple tweaks to the
market structure such as a better high/low mechanism, a Tape is a great idea.
Of course, this being Dmitri and I, we can’t quite agree on
how the mechanism should work! Again though, this is irrelevant because the
industry will no doubt shape the service to its collective needs. Suffice to
say I have concerns about larger tickets becoming visible and when trades are
published and Dmitri doesn’t because he is confident he has it all in hand!
I remain unsure whether the Tape will launch in its proposed
form, mainly because I sense a desire on the part of the industry for the more
utilitarian approach of collective ownership, but launch it will – and that has
to be seen as a step forward for transparency of action at least.
It also helps that Dmitri is so cheerfully open about
everything, I love how so many of his statements (in a private environment, not
on stage) are accompanied by one or more of his colleagues going “shhhh”!
The foreign exchange industry is about opinion and
execution. Dmitri Galinov has opinions and is very good and getting them
executed. We may not all agree with everything he says and
some may look at him askance on occasion, but there is no getting away from the
fact that he has shaken the tree somewhat, and continues to do so.
On execution the numbers also stack up, for it has been a
tough environment for platforms and FastMatch has, to all intents and purposes,
outperformed. Comparing the first three months of this year with the last
three, CME saw a very small increase in ADV over the three months period,
everyone else that publishes was down. FastMatch was up.
Equally, over the first 11 months of 2015 and 2016 (which
may be skewed by the impact of the FXCM debacle post-SNB – for which,
incidentally, Dmitri also warrants praise for keeping FastMatch afloat), the
numbers stack up in FastMatch’s favour, rising nearly 50% while others were
flat to quite a bit down.
I sense that Dmitri still believes FX will go to an equities-style model, again something I don’t necessarily agree with, and that a lot of his ideas being generated are from that world. That is no bad thing, for industries can always learn from each other and the more we have ideas from elsewhere challenging our perceived collective wisdom the better. Dmitri challenges people and their entrenched views and, to me this is important, he is fun!
And that is why Dmitri Galinov is my Person of the Year.
May I wish all readers a very happy new year and the very
best for what I hope will be a successful 2017.