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Latest FX Analysis

A New Dawn? May 25 marks the release of the full FX Global Code of Conduct, an event that has been much anticipated in FX circles. What will the Code bring to the FX industry and what are the key changes likely to be experienced by participants? Colin Lambert finds out. It all starts – and to a degree ends – with Annex Three, which sits at the end of one of the more important documents released in the FX industry. A lot has been debated and speculated over as the FX Code of Conduct has been developed by the Bank for International Settlements’ FX Working Group
Hotspot: A Fresh Approach Following hot on the heels of its second ownership change in a relatively short time, Hotspot is maintaining the momentum of change by launching new products, specifically outright deliverable forwards. It has also announced a raft of new hires and sought to broaden its geographical footprint. Galen Stops speaks to senior staff at the platform about what these changes - which include the addition of non-deliverable forwards to the platform - are building towards, as well as their view on the changing FX market structure.
Why Have FastMatch Volumes Spiked? There have been some raised eyebrows in the FX industry recently amongst those that have noticed FastMatch’s sudden spike in volumes. Profit & Loss has previously noted FastMatch’s strong start to the year in terms of average daily volumes (ADV), highlighting that in March it reported an ADV of $19.2 billion for the month, a new record high and almost double the $10.1 billion ADV it registered in March 2016. Then in April it set another high water mark in ADV terms, eclipsing March’s record with ADV of $19.8 billion in April, up 83.3% from April 2016.
Sucden Targets Growth Through Diversity Following the launch of Sucden Financial’s new OTC FX options service, Galen Stops talks to Noel Singh, head of e-FX business development at the brokerage, about how it’s planning to diversify its FX offering. Despite having an FX franchise that is over 30 years old, an e-FX offering that has been around for more than eight years and a balance sheet of over $100 million, Sucden Financial is not exactly a household name in the wholesale FX market. But the firm is now working to change that as it seeks to diversify its FX business in response to changing market conditions.
CME Europe, What Went Wrong? Six years after launching CME Clearing Europe and three years after launching CME Europe, the Chicago-based exchange group has announced that it will shut both operations at the end of this year. Although the move was something of a surprise, Galen Stops discovers there are some compelling reasons why the initiative failed. He asks what went wrong and what does this move mean for CME's remaining European operations as well as the ongoing efforts by its competitors to get a European FX derivatives business off the ground?
Unshackling the FX Market Darren Jer, CEO of MarketFactory, talks to Galen Stops about flash crashes, the new latency arms race and how technology will enable the FX market to keep growing in size. Galen Stops: What’s going to be the main focus for MarketFactory as a company in 2017? Darren Jer: Well let me just start by saying that FX is the biggest market that not everyone knows about. In the equities market last year, $114 trillion was traded across all exchanges; in FX, that figure is $1.4 quadrillion. In FX we talk in average daily volume (ADV) numbers all the time so we’re just used to the size of the market, $5.1 trillion per day, but the general public and traders in other asset classes don’t know the degree of notional liquidity.
Explaining GTX's Bespoke TCA Tool In February, Profit & Loss reported that GTX had partnered with Ideal Prediction, an independent trading analytics and data science company, to offer its clients analytics aimed at optimising their FX trading. GTX first hired Ideal Prediction to optimise client liquidity pools and trade execution performance in March 2016 and the perceived success of this project, combined with the management teams’ strong working relationship with Ideal Prediction CEO, John Crouch, from his time working at Credit Suisse, prompted the two firms to look for more ways to utilise the data at GTX’s disposal to help its clients. The end product of this was the analytics tool that GTX began offering to firms in February.
A Lighter Footprint Increased attention on market impact has prompted non-bank market making firm XTX to release a new analysis tool, XTX-ray. Colin Lambert takes a look. Market impact has grown steadily as a topic of conversation in the FX industry, thanks in part to the events of October 7, 2016 in Cable, but also due to the increasing instances of “mini” flash moves in markets. As risk warehousing activities have been scaled back across the banking industry, a crucial buffer is being thinned out, meaning orders that previously had minimal or no impact on market levels, now do.
Will 2017 be the Year that Blockchain Becomes Real? After two years of endless hype, Galen Stops looks at whether 2017 will be the year that distributed ledger technology broadly starts getting put into production within mainstream financial services. Last year saw numerous firms producing proof-of-concepts (POC) regarding the potential application of distributed ledger technology (DLT), issuing whitepapers about the technology and hosting “hackathons” and other events to discuss and promote its use within financial services. Profit & Loss covered the major developments around DLT last year, but the editorial team started expressing frustration towards the end of the year regarding the disparity between the PR and subsequent press coverage surrounding DLT and the actual amount of tangible projects being put into production using this technology.
CTA Performance: Decline or Dip? Galen Stops looks at why CTA strategies struggled in 2016, examines why there is enthusiasm from these managers bubbling up for 2017 and looks at the trends that are shaping the managed futures industry. 2016 wasn’t exactly a vintage year for CTAs. The SocGen Prime Services SG CTA Index ended the year in negative territory for the first time since 2012, showing returns of -2.89%. Likewise, the BarclayHedge CTA Index was -1.14% for the year. One explanation for why these firms struggled was the continued low interest rate environment, which has kept bond prices low and helped drive up the stock market.