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FXPB: What Does the Global Code of Conduct Say? “Prime Brokerage Participants should strive to monitor and control trading permissions and credit provision in Real Time at all stages of transactions in a manner consistent with the profile of their activity in the market to reduce risk to all parties.” – Principle 41 Prime Brokerage Participants should strive to develop and/or implement robust control systems that include the timely allocation, monitoring, amendment, and/or termination of credit limits and permissions and adequately manage associated risks. • Prime Brokerage Clients should strive for Real-Time monitoring of their available lines and permitted transaction types and tenors so that only trades within permitted parameters are executed.
Are Cryptocurrencies Edging Towards Mainstream Adoption? At the very start of June, Profit & Loss published an article looking at why demand for cryptocurrencies had spiked in 2017, with the price of bitcoin rising over 200% between January and the latter end of May. Subsequent to that, demand continued to grow, with the price of bitcoin reaching $4,950 by the start of September. Meanwhile ether – the native cryptocurrency of the Ethereum network – went from $8.29 at the start of the year to $388 by September.
FXPB: Which Way is the Pendulum Swinging? Over the past few years, some FX prime brokers have gone from aggressively competing for market share to off-boarding clients and increasing their fees. What happened to make the pendulum swing so dramatically, and is it due for another reversal? Galen Stops reports. Relatively speaking, it wasn’t all that long ago that banks were aggressively trying to build out their FX prime brokerage (FXPB) businesses and competition was fierce. This precipitated a race to the bottom in terms of fees by some FXPBs. Numerous market sources claim that Morgan Stanley was at the forefront of this race, although they note that a number of major FXPB players were not far behind.
The Paradox of Prime Prime brokerage has had an interesting relationship with the FX market – after the initial burst of excitement when it first launched in the late 1990s, the middle years of the first decade of this century saw a growing consensus that it was a good idea that had, had its day. Generally speaking, PB customers were restricted to dealing on a bilateral basis with the major banks, so while there was undoubtedly some benefit involved, the value proposition wasn’t one that lent itself to continued growth.
The Cycle of Opportunity The latest issue of Profit & Loss is headlined by a special report on the prime brokerage and prime-of-prime industry. The report also looks at newer models that could disrupt the current industry landscape. As part of the report, which can be read in its entirety in the Q3 issue, Colin Lambert spoke to Gavin White, CEO of Invest Global, who believes the current environment in financial markets is presenting opportunities for firms in prime services. Moreover, White argues, we have seen this environment before...
How Long Can the MXN Rally Last? Galen Stops looks at the drivers behind the appreciation of the Mexican peso and asks whether the rally can continue. Few, if any, saw this coming. After Donald Trump won the US presidential race in November 2016, USD/MXN went from 18.03 up to 20.89, and by the time of his inauguration in January 2017, the exchange rate was up to 21.58. This depreciation of the peso seemed eminently reasonable at the time, given that on the campaign trail Trump had promised to renegotiate the North American Free Trade Agreement (Nafta) in America’s favour or terminate the agreement altogether, not to mention building a border wall between the US and Mexico at the latter’s expense.
Dodd-Frank Repeal Bill: What Does it Mean? Galen Stops takes a look at Republican attempts to repeal the Dodd-Frank Act On Thursday last week, the US House of Representatives approved the Financial Choice Act (Choice Act), which would repeal major elements of the Dodd-Frank Act. But what does this actually mean in practice? Well, if it is enacted, the bill passed by the House will lead to a whole range of changes to Dodd-Frank. For starters, the Choice Act would implement significant changes to Title 1 of Dodd-Frank, entitled “Regulatory Relief for Strongly Capitalised, Well-Managed Banking Organizations”, which would specifically alter the remit of the Financial Stability Oversight Council (FSOC).
Breaking the Mold Noble Bank International recently launched with a new business model aimed at alleviating the current credit constraints in the FX market. Will it be a “game changer” for the industry? Galen Stops takes a look. If every new product or service launch that claimed to be “game changing” actually was, the FX industry would be a dizzying place to work in, such is the popularity of this phrase and its variant forms. As a result, it was hardly surprising to see Noble Bank International (Noble) hail its new real-time, post-trade FX service as “industry changing”, when its official launch was announced last month. And yet, if the Noble model manages to gain significant traction within the FX industry, it could have a significant impact on how the market operates.
A Perfect Storm: The Buy Side’s Liquidity Conundrum David Newns, senior managing director at State Street and global head of Currenex, speaks with Nicola Tavendale about the confluence of factors that are creating a unique set of challenges for the buy side. I ncreasing regulatory requirements, coupled with the changing characteristics of liquidity in the FX market place in recent years, has resulted in a heightened focus from the buy side on how it can effectively manage its FX exposures. The phase two release of the Global Code will also address specifics relating to the principle of execution.
Blockchain Vs. Bitcoin: Is the Pendulum Swinging Back? Galen Stops looks at why demand for cryptoassets has skyrocketed in 2017 and assesses whether they have any future in mainstream financial markets. The first working implementation of a blockchain that the world had ever seen was in the Bitcoin software released in 2009. Bitcoin the cryptocurrency then rose to prominence in 2013 when, driven in part by a flurry of media attention, its value rose past $1,000 for the first time. Following that, 2014 represented a long and painful year of price decline for Bitcoin as an asset, but it continued to garner a lot of attention, not always for good reasons. Then in 2015 the narrative began to change as people really started talking about the potential applications of blockchain technology distinct from any digital assets.