And so, with the usual mixture of celebration and regret, we arrive at the final Accolade of 2018 – my FX Person of the Year.

Obviously last year was a little controversial as I awarded it to an anonymous person (although I think I know the identity of the person concerned) and, you will be pleased to hear, this year is little different.

There was a reasonable field this year, although perhaps not quite up to the standards of previous years when we had people trying new things or driving new initiatives – I think if I look back on 2018 I see two things, consolidation as an industry and lawyers! The latter had to be an early contender for this accolade, not least for the fact that they tried (and may still get away with) charging $300 million for their work in one of the FX lawsuits – nice work if you can get it!

Of course my distaste for the legal profession as epitomised by these ambulance chasers means I refuse to go anywhere near them, although I have to say in a modest teaser for the readers that this year’s winner is loosely connected with legal matters.

More personally – and given my eagerness to slam those using benchmarks at any given time this should come as no surprise – I pondered awarding my Person of the Year to Philippe Bonnefoy, founder of Eleuthera Capital, who explained, much more eloquently and authoritatively than I could, the shortcomings of FX benchmarks. You can listen to his thoughts in this video – suffice to say he’s my hero!

Elsewhere a shout out must go to Caplin CEO John Ashworth who is not only a great “tourist” but throughout the year managed to entertain audiences at conferences on a tremendous range of subjects. More specifically, however, and given how I think I can handle moderating panels fairly well, he managed to floor me a couple of times this year with his answers. One, in Frankfurt, involved airline pilot training and the lessons for the FX industry, which I didn’t see coming; and the second…well in Chicago he responded to my direction to talk about data by framing it in the form of, how can I put it, teenage “extra-curricular activities”!

Sadly, however, the winner has to come from a different – and more serious – direction. Regular readers will know, and often remark to me in person, that I have been banging a drum about the Mark Johnson case, more so since he was sentenced to jail time.

I continue to believe that save for a slightly more proactive approach in dealing with the customer (or the advisory firm that seems to have earned good corn for displaying a lack of real knowledge about FX hedging procedures) then the Cairn Energy transaction was handled about as well as it could have been. The bank didn’t deliberately overbuy and it didn’t wreck the market. Anyone who thinks that buying more than £2 billion in December can be done without some market impact needs educating and yes DoJ, I am talking about you and your “expert” witnesses.

There remains a fundamental misunderstanding over how FX markets work – framed as most US views appear to be (and this is inevitable for a nation so obsessed with its stock market) by the exchange model – and this needs to be changed. Obviously there is an element of lottery to the legal process, especially when a jury gets involved – I think most people were very surprised by the Cartel verdict given what has transpired in the Johnson case – but the latter is now at the appeal stage, where those judging have experience and time to understand the fundamentals.

It is good that Mark Johnson remains out on bail so he can at least live with his family and friends while awaiting the next stage of the process but it is vital that the industry does not take its foot off the gas and thinks that the problem will just go away. It won’t. Pre-hedging large orders remains a legal minefield as far as the US is concerned and that should worry everyone involved – not least US-based corporations who might find their liquidity pools limited when they have to assume the market risk relating to their larger hedges.

So we need to maintain focus as 2019 commences to ensure that the right outcome for both Mark Johnson, and by association the FX industry, is achieved.

Which brings me to my Person of the Year, or rather my Person(s) of the Year. 

I very much need to highlight the contribution made by Professor Torben Andersen, the Nathan S. and Mary P. Sharp Professor of Finance at the Kellogg School of Management at Northwestern University, who submitted an Amicus Brief on behalf of Mark Johnson, but given the broader FX landscape my Person(s) of the Year is ACI – The Financial Markets Association.

I have had – and indeed continue to have – issues with some elements of how ACI goes about its business, but when it was needed it stood up to be counted and delivered its own Amicus Brief. There were undoubtedly several people within ACI involved in the work, I understand it a lot of heavy lifting was done by the US chapter, but whoever was involved showed real industry leadership.

I have to confess – and yes this is a little strong given it’s the season of goodwill – but I have a feeling of contempt for those associations that are quick to put themselves forward when there is something easy to discuss but who didn’t raise a finger to help Johnson. These bodies are paid good money to represent the industry and to me that means being more than a talking head, it means dedicating resources to issues of importance to the people and firms that pay them.

In the case of Mark Johnson these associations came up short and we all have to hope that their inaction doesn’t negatively impact the outcome. For ACI, however, I have nothing but plaudits. It is not just that it stepped up when others declined to do so, it did so from a position of authority. We all want the best possible standards in the FX industry and I think most will accept that somehow, in the early years of this century, adherence dwindled to unacceptable levels – that recognition is why so many firms have signed up to the FX Global Code.

ACI was there long before that, however, with its Model Code, highlighting its commitment to best practice. Hopefully those with Mark Johnson’s immediate fate in their hands will acknowledge that an association that has dedicated itself to best practice for decades, not just the last three years, has publicly stepped up and said that pre-hedging is necessary in FX markets. 

This viewpoint has, to repeat myself, not been borne from a recently discovered urgency to tighten up standards, it has emanated from a deep and long understanding of the issues and of the best approach for the customer. I have a deep respect for those working so hard to deliver the FX Global Code and broaden its reach, it is a vital document that can protect the FX industry from over-zealous regulation if participants adhere to it, however it needs to be acknowledged that ACI was there many years ago. Not only that, but when the industry needed it, it was not found wanting, unlike some of its peers.

Bravo ACI – The Financial Markets Association.

Twitter @lamboPnL

Twitter @Profit_and_Loss


Colin Lambert

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