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Bitcoin: The Next Step As the cryptocurrency, bitcoin, takes arguably the next big step towards mainstream adoption, Galen Stops takes a look at the different approaches being taken by regulated exchanges towards designing bitcoin contracts and regulators to overseeing them. Last week, on December 1, three exchanges regulated by the Commodity Futures Trading Commission (CFTC) self-certified new cash-settled derivatives contracts based on bitcoin. The exchanges – or designated contract markets (DCMs) – are the CME, the CBOE Futures Exchange (CFE) and the Cantor Exchange.
Spreading the Wealth With more information becoming increasingly accessible to a wider set of FX market participants, are we witnessing the democratisation of data? Galen Stops takes a look. The starting point for claiming that data is being democratised in FX, and in the financial markets more broadly, is to point out how much more accessible data has become to a wider range of market participants.  At the retail level, people can use smartphones to find out a currency exchange rate at any time in just seconds. At the professional level, trading firms can now access high-speed market data from numerous sources at affordable prices, while aggregators allow them to rapidly compare the data coming on from these sources. 
The Human Touch Despite the hype around artificial intelligence and machine learning in an increasingly data-driven environment, Galen Stops finds that humans remain a vital part of the trading process. Intel co-founder Gordon Moore famously noticed that the number of transistors per square inch on integrated circuits had doubled every year since their invention. This observation, which has become known as Moore’s Law, essentially predicts that this trend will continue into the foreseeable future, meaning that computing power will become more and more efficient. Likewise, the acceleration of technology in financial markets – including FX – has meant that these markets have become increasingly efficient.
Drilling for the New Oil If data is the new oil, then how trading firms “drill” it in order to generate alpha becomes increasingly important. Galen Stops reports. So often has the phrase been used recently that it’s in danger of becoming something of a cliché but, apparently, data is the new oil. To see evidence of this, look no further than the technology giants that have emerged out of Silicon Valley. Yes, Facebook doesn’t charge users money for the social media platform it provides, but is it free? Arguably, users “pay” with the data that they create via their interactions on the platform, which Facebook is then free to use and sell to generate profits.
The Franchise Builder? TCA can be about more than measuring execution quality. Colin Lambert talks to a firm that believes it can be the genesis of a new type of bank-client relationship in FX. A TCA report has been analysed and the lessons learned – time to file it away, never to be seen again right? Wrong, according to Andy Woolmer, CEO of NewChangeFX, who believes the data offers a tremendous opportunity to build a new type of FX franchise. “Clients originally used our data for TCA, but it has moved beyond that and it needed to,” he explains. “Too many times the TCA provided to a client was based upon execution from the algo that was used – that circularity represented a problem for the asset manager and, by association, the bank. Why would they want to get involved in something where the trade feeds the analysis?
The Human Problem The wealth of data and predominance of electronic trading mean TCA in spot FX should be a relatively straightforward process. But what happens when a market is mainly voice traded and data is sporadic? Colin Lambert finds out. Among the many upheavals created by the impending MiFID II regulation is the requirement to timestamp all trades in compass of the regulation. In FX markets this has created a paradox, for while it is easy to timestamp a spot FX trade, this product is not “in scope”. FX forwards and swaps, on the other hand, are in scope and they are mainly traded over voice channels and no public central limit order book (CLOB) has enough volume or data to provide a “market” price.
CLS Enters the Market Data Fray Galen Stops takes a look at the new data service launched by CLS Group. In September, CLS announced the launch of its new data service, CLSData. Speaking to Profit & Loss at the time of the launch, the firm’s CEO, David Puth, explained that CLS was “now entering the data market space in a very comprehensive way”. Since its launch in 2002, CLS has recorded every single transaction submitted to it, and considering that an average daily volume (ADV) of over $1 trillion is processed by CLS each day, this represents a massive and rather unique data set.
A Slow Burn TCA in FX has long been viewed as the ultimate box-ticking exercise, but that is now changing as asset owners and oversight functions focus more keenly on the value they leave on the table when hedging their currency exposures. But what, Colin Lambert asks, should good FX TCA look like? Several years ago at a Profit & Loss Forex Network New York conference, the then head of an execution desk at a major Canadian pension fund recounted an experience he had earlier that year. Five weeks of meetings and conference calls had taken place to decide whether or not to sell USD/CAD 500 million, during which time the market had drifted some 200 points lower. Once the decision was taken to sell, another week went by as the method of execution was debated, during which Funds fell another 50 points. When the deal was finally executed,
Data: The Lifeblood of the FX Market Probably the biggest change in the FX market over the past 10 years has been the availability of data. This is not to say that we never had data before, most voice traders relied upon their brokers to tell them where the market was – and although it was (very!) unreconstructed, it was data. In terms of hard numbers on a screen, the market was revolutionised by Reuters terminals in the 1970s, enhanced by the launch of rival offerings (nearly all borne out of a news service), and then again with the launch of electronic trading and mobile apps.
Bridging the Gap Galen Stops takes a look at the new initiative from the CME that aims to bridge the gap between the OTC and listed FX markets. It’s an old debate in the FX industry – will the market inevitably move towards an exchange model? Indeed, this question was the cover story on a 2001 edition of Profit & Loss.  As part of the response to the financial crisis, regulators favoured pushing more trading activity towards a centrally cleared model, while certain other regulations looked to add extra costs into bilateral trading. All of this led some market observers to predict that more trading activity would shift towards an exchange traded model.