At the start of 2017, a single bitcoin was valued at less than $1,000, yet by mid-December it had almost hit $20,000. Investors were pouring into the space, Initial Coin Offerings (ICOs) were being launched left, right and centre and - given the limited supply of bitcoins that can ever exist - some market commentators were making wild predictions about how high the value of this asset would ultimately go.
But despite starting the year at around the $15,000 mark, the price of bitcoin has fallen to $6,671 at the time of writing and other major cryptocurrencies have suffered a similar decline. So what went wrong?
Thus far, despite the hype and excitement around cryptocurrencies, most CTAs haven’t exactly been in a rush to start trading these assets. However, as Galen Stops reports, this might be about to change.
As Cboe and CME both prepared to launch bitcoin futures contracts in December 2017, the price of a single bitcoin roared upwards to peak at over $19,000.
For retail investors, the attraction of this particular cryptocurrency was that the price had been going up all year, having traded at around $985 per bitcoin in January of last year. For professional traders, the attraction of bitcoin was that it was an asset that was actually moving, it was uncorrelated to other assets and therefore offered diversification benefits and, on top of all this, was almost exclusively being traded by retail punters.
As mobile trading continues to grow in popularity, Scott Wacker, global head of e-commerce sales and marketing at JP Morgan, talks about how client demands for this product have changed.
Profit & Loss: How have you seen client demands regarding mobile trading evolve in recent years?
Scott Wacker: Initially, it was about showing clients what was going on in the market. We felt that there were a lot of traders who might be trading on our platform who would go into meetings and then want to monitor the markets during those meetings. So we looked at mobile as a way of differentiating our platform from competitors by offering them access to this market data.
Marcus Butt, global head of FX prime services and futures at NatWest Markets, talks about how the bank is developing its FX Prime Brokerage offering in response to changing client needs.
Profit & Loss: So what are you doing on the FXPB side of your e-FX platform that you think differentiates your offering right now?
Marcus Butt: What we're doing on the platform that is unique is really a reflection of what we’re doing in the business. Part of this is that we’ve introduced a number of new prime brokerage models to accommodate the diversification of our client base.
Ronan Julien, global head of commodity derivatives e-distribution at BNP Paribas, talks about how the bank is doing things differently in the commodities space.
Profit & Loss: What do you think is differen about your approach to listing commodities on your e-trading platform?
Ronan Julien: The way that commodities trade is largely the same as it was 10 years ago. However, the demands from clients on the one side and regulators on the other have continued to evolve and so we looked to other asset classes for inspiration to help solve this disconnect.
Mark Johnson, the former head of global FX cash trading at HSBC in London, has been sentenced to two years in prison following his conviction for eight counts of wire fraud and one conspiracy charge by a US court in October last year. Johnson was also fined $300,000.
Profit & Loss has reported extensively on the case, and just pulling out a few of the headlines provides a fairly decent timeline for how the case has developed since Johnson was arrested in New York almost two years ago.
P&L Report Card
Structured products have become mainstream with the explosion in service providers offering second generation derivatives and other yield enhancing products. Most banks now offer a reasonable range of structured products and more and more are building out the ability to create your own basket. Mainly it has to be said, we are seeing this in the FX space – we are primarily a currency and derivatives magazine after all – but there are also some looking more closely at multi-asset structured notes.
P&L Report Card
There are signs – and we should be whispering it – that the prime brokerage space is waking up again. Partly we suspect this could be because some prime-of-primes are revitalising the major providers (it could also be they are getting too good for the majors’ liking and the latter needs to spend more on keeping clients) and partly it is because they are done cutting the client tail and are now content to focus on better functionality for those remaining clients.
P&L Report Card
If there appears to be one area where MiFID II has been something of a fizzer it is research – or at least in FX terms it is. Few, if any, banks were concerned or had seen a huge impact on their output, generally speaking if required a client could be put behind a virtual paywall, or not permissioned for certain content. Others are happy to absorb the cost of research, meaning that for many clients not a lot has changed and for the banks, few have dramatically changed their business model.
P&L Report Card
Although the algo is taking on more importance in terms of order management, the relatively slow take up, allied to more short term bursts of volatility, means that customers are refocusing their attention on basic order management.
The trust issues that drove a wedge between some clients and the banking industry appear to be on the way to being, if not totally, solved, not least thanks to sometimes draconian oversight at the banks. Thus an old friend, the order, is making a comeback. Of course, if we were to be cynical we would say it is doing so because leaving an “at best” order neatly shifts the best execution emphasis back onto the bank!