Although much is said about the rising cost of regulation in financial markets, there have been few attempts to empirically demonstrate the impact.
A new Staff Working Paper published by the Bank of England, entitled Dealer intermediation, market liquidity and the impact of regulatory reform, and written by Yuliya Baranova, Zijun Liu and Tamarah Shakir, seeks to assess the impact and finds that while the cost of regulation is higher in stable market conditions, in periods of stress benefits accrue.
Managed futures traders lost -0.98% in June, according to the Barclay CTA Index compiled by BarclayHedge.
This was the largest monthly decline so far this year as the index is down -1.65% through the first two quarters of 2017.
The BTOP50 Index, which tracks the 50 largest investable CTAs, also fell, registering a loss of -2.60% in June, and is down -4.77% for the year as well.
“The first half of 2017 has been difficult for the CTA industry,” says Sol Waksman, founder and president of BarclayHedge. “The combination of low volatility and sharp trend reversals has helped to suppress returns for managed futures.”
The average daily volume (ADV) of trades submitted to CLS was $1.64 trillion in June, up 6% from $1.55 trillion in May, and up 1.64% year-on-year.
The main driver of this growth appears to have been an increase in swaps and forward activity. Swaps accounted for $1.08 trillion of the ADV submitted to CLS in June, up 9.3% month-on-month and 7.5% year-on-year.
The ADV of $108 billion in FX forwards in June represented a 3.8% increase from the previous month and a 20% growth from June 2016, when an ADV of $90 billion was recorded.
Patrick O’Brien has left his position as managing director, foreign exchange, at BNY Mellon.
Based in Pittsburgh, O’Brien had been with BNY Mellon since 2006. Profit & Loss understands that his departure is part of a broader move by the custodian bank to consolidate its FX dealing room in New York.
Prior to working at BNY Mellon, O’Brien spent just under two years as a senior vice president, FX trading, at National Australia Bank (NAB) in New York.
Before joining NAB in 2005, O’Brien was a manager and chief dealer for spot FX at Commonwealth Bank for twelve years, operating out of both New York and Sydney during that time.
TradAir has partnered with Singapore-based technology firm Snap Innovations, to jointly develop FX solutions, initially for Asian market participants.
The joint venture has been made possible through funding provided by the Singapore Israel Industrial R&D Foundation (SIIRD), a co-operation between the Singapore Economic Development Board (EDB) and the Israel Innovation Authority to promote, facilitate and support joint industrial R&D collaboration between Singapore-based companies and Israel-based companies across different industries.
The firms say the new solutions will enhance regional FX liquidity, enabling Asian market participants to aggregate, trade and become market makers between the currently fragmented OTC and exchange-based regional FX liquidity pools.
The Q3 edition of Profit & Loss will feature an in-depth special report on FX prime services, looking at the significant changes that have occurred in this segment of the market and how these will impact trading firms in the future.
But we want to hear from you about your expectations regarding the future of FX prime services, which is why we're asking you to fill out this 1-2 min multiple choice survey: https://www.surveymonkey.co.uk/r/PrimeServices
All survey responses will remain anonymous, but should you choose to include your email address at the bottom of the survey you will receive a free PDF of the special report when it is published in September.
Douglas Nevistich has re-joined NEX (Nex) Group in New York.
He joins as a senior product manager after a brief stint at 360T, where he was also a senior product manager.
Prior to joining 360T in August 2016, Nevistich spent 16 years at Icap, which transitioned into Nex Group after it completed the sale of its voice broking business to Tullett Prebon in December 2016.
Nevistich was initially on the technology side of the business at Icap before moving on to product management, where he was the global API product manager and EBS market product manager for the Americas.
A study released by Deutsche Bank seeks to challenge the assumption that having more liquidity providers in an aggregator inevitably leads to better execution.
Aggregators are popular in the FX market, enabling trading firms to routinely put multiple liquidity providers in competition and then transact with the one offering the best price. Being able to consolidate liquidity, in the form of bid and offer prices and amounts, from various sources into a single, consolidated order book is particularly valuable in an OTC market with no centralised exchange.
“But in a market where the terms of trade are privately negotiated and the liquidity provided is bespoke to the trader, deciding on a suitable aggregation setup is not a trivial task,” according to the report, titled “Execution in an Aggregator”.
BNP Paribas (BNPP) has agreed a $246 million settlement with the Board of Governors of the Federal Reserve System (FRB) relating to past misconduct in its foreign exchange business.
The settlement will be covered by existing provisions. This follows the announcement by BNPP of a settlement with the New York State Department of Financial Services on the 24th May relating to the same issue.
In reaching this settlement, the FRB acknowledged the bank’s group-wide remediation initiatives and the full cooperation of BNPP in the investigation.
Citadel Securities has partnered with BestX to provide its clients with independent analysis of its FX execution quality.
"We're confident in the quality of our execution and partnering with an independent TCA provider demonstrates this. From a market structure standpoint, I think that the FX market can benefit from more transparency, whether it's through independent measurement of execution quality or the creation of a central tape," Kevin Kimmel, global head of e-FX at Citadel Securities, tells Profit & Loss.
Kimmel says that providing independent TCA provides value because it eliminates any potential concerns of bias in the execution analysis and because it helps create standardisation in terms of how the analysis is conducted.