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Questions, Questions, Questions FXCM has known its share of controversy in recent years and now the firm has been barred from operating in the US. Profit and Loss staff report on an issue that has triggered another round of introspection in the FX industry. Just over two years after staving off bankruptcy due to losses resulting from the Swiss National Bank’s decision to unpeg the Swiss franc, FXCM has been forced to withdraw from operating in the US, changed its name and seen its two principals step down from the business. The unravelling of FXCM has impacted across the FX industry with questions being asked around the effectiveness of self-regulation, how the Global Code of Conduct could deal with a repeat offence, and how the industry moves forward in an atmosphere of mistrust?
Last Men Standing FXCM’s forced exit from the US leaves only two major retail OTC FX-focused brokerages in the market. Galen Stops talks to the CEOs of these firms about what this means for the industry. “The retail foreign exchange market has suffered a less than exemplary reputation for some time now,” concedes Vatsa Narasimha, CEO of Oanda. The latest blow to the industry’s reputation comes as the US Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) concluded that FXCM had defrauded its US customers, ordering it to withdraw from doing business in the country and fining the firm and its founding partners a total of $7 million.
FXCM: The Other Side of the Story The FX industry has, by and large, been swift and united in its condemnation of the actions of FXCM, for which the firm was banned from the US and fined $7 million for defrauding FX customers. But, as they say, there are always two sides to every story and so Profit & Loss has been talking to various market sources that provide different perspectives on this case. This is challenging because as part of the legal agreements between FXCM and the Commodity Futures Trading Commission (CFTC), the firm neither denied nor admitted the allegations against it, and therefore cannot speak to the press about the issue.
A New Age for FX Market Data As FX execution becomes increasingly fragmented with more and more trading taking place in dark environments, price discovery is rapidly becoming one of the industry’s key challenges. But can the recent proliferation of new market data offerings from the leading ECNs really help tackle this problem as claimed? Nicola Tavendale writes. The past year’s run of unprecedented market events has only served to highlight the growing demand for timely and reliable FX market data, yet innovation in this area has notably lagged behind the levels seen in other areas of the financial markets.
The DNA of a Flash Crash A new paper uses trade repository data to forensically analyse the Swiss franc de-pegging and while Colin Lambert finds its conclusions are familiar, the paper offers other insights The story is familiar to anyone in the foreign exchange business – on January 15, 2015, the Swiss National Bank shocked the markets with the announcement it was abandoning its Swiss franc ceiling to the euro at 1.2000. Chaos ensued as EUR/CHF collapsed over 40% before recovering sharply, after which the industry was left to rake over the ashes of what was to many a debacle.
The Reality Check Much has been made of the sharp drop in spot FX volumes in the recent BIS Turnover Survey, but, Colin Lambert asks, is what we are seeing merely a return to a longer term trend? A regular theme in Profit & Loss over the past two years has been, since the traumatic events of January 15, 2015 around the Swiss franc peg, the return to relationship trading at the expense of the all-to-all model. Analysis and data recently released by the Bank for International Settlements based upon its recent Triennial Central Bank Survey of FX Turnover appears to support the notion that the FX market is losing its infatuation with market share at all costs and is much more choosy about who it deals with.
EBS BrokerTec Leverages New Yuniti Platform to Make a Play in Asia Following a deal inked in mid-2016 with China’s CFETS for electronic execution services in mainland China, EBS BrokerTec has been actively expanding its footprint and relocating key staff to the region. P&L’s Julie Ros talks with Jeff Ward, global head of EBS Direct and head of EBS BrokerTec in Asia, about the moves. Recognising the potential for growth across Asia Pacific, EBS BrokerTec embarked on a growth plan for the region nearly a year ago, as the company was working on a deal
The FX Jobs Market: A Game of Musical Chairs As the FX jobs market becomes ever more competitive, Galen Stops talks to recruiters about the skill sets that firms will be looking for in 2017 As the FX industry continues to evolve, so too does the skill set that employers require and the roles that are available. For example, once upon a time it would have seemed inconceivable that vendors and ECNs would need liquidity managers. Now many of them employ people in a role similar to that of an e-trader, but instead of taking risk their job is to examine the liquidity available and help guarantee the efficiency of trading for clients and optimise P&L for their own company.
Mapping Out the Plan Neill Penney, co-head of trading at Thomson Reuters, talks to Galen Stops about the recent changes in the firm’s FX business and details how it plans to continue developing it in 2017. There were some significant changes to Thomson Reuters’ FX business in 2016, with one of the most visible being the departure of Phil Weisberg in November, who had headed the FX business at the firm since 2012. With Weisberg leaving “to pursue opportunities outside the firm”, Thomson Reuters has re-structured its management, introducing a new business unit called Trading.
FX Volatility: Creating a New Playbook In recent years, the FX market has had to cope with some major spikes in volatility, forcing firms to adjust how they trade this market. The number of large market moves on the back of thin liquidity during unanticipated (and anticipated) market events seen last year – from SNB to Brexit to the US elections – raises the question whether there a need for a new “FX Playbook”. Speaking at Profit & Loss Forex Network Chicago, Stephen Flanagan, executive director, global FX e-commerce risk manager at JP Morgan, highlighted how firms have made adjustments.