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Six Banks Face Lawsuits over Last Look Six banks are facing a class action lawsuit over alleged abusive practices involving the use of last look in their e-FX businesses. The six, BNP Paribas (which has already been fined by the New York Department of Financial Services for, amongst other things, it’s broad use of last look), Citi, Credit Suisse, Goldman Sachs, Morgan Stanley and Royal Bank of Scotland face a claim from former retail broker-dealer Alpari (US) in the hundreds of million of dollars according to documents filed in a New York court this week.
Report: Top Dealers Loosen Grip on FX Market (Slightly) The top five FX dealers are losing market share, according to a new report from Greenwich Associates. Although the world’s five biggest FX dealers still capture a massive 44% of global market share in aggregate, according to the research, that proportion is down from 48% last year and from 53% in 2013. The report identifies several trends that are driving these changes. It says that while top-tier dealers have been narrowing the scope of their product, regional and client coverage, FX investors continue to increase their trading via multi-dealer platforms, which create a more level playing field for liquidity providers.
Ktorza Ruling Overturned A UK appeals court judge has decided that former JP Morgan FX salesperson Patrice Ktorza’s case must be reheard by an employment tribunal. In a judgement, Judge David Richardson accepted the bank’s claim that the original judge who head the case had adopted “a legally incorrect” approach to the law and “disregarded or misunderstood” important aspects of JP Morgan’s case. Ktorza won his claim for unfair dismissal in August 2016, however Profit & Loss noted at the time that the case was “tricky” because it involved the subject of partial fills of client orders.
CLS Volumes Tick Up in May The average daily traded volume submitted to CLS was $1.55 trillion in May, up 2% from the previous month and up 10% year-on-year. The CLS data shows FX spot ADV of $454 billion in May, up 4.4% compared to April and up 4.8% from May 2016. Swap ADV, meanwhile, was $989 billion in May, which was flat on the previous month, but up 9% in comparison to the same month last year. Although by far still the smallest product segment submitted to CLS in terms of ADV, FX forwards saw the biggest month-on-month and year-on-year increases in May.
HSBC Back in the Legal Firing Line HSBC is facing renewed legal action over alleged activities within its FX business. According to a report in the Financial Times, which cites legal filings it has seen, global macro advisory firm ECU Group is requesting a court order the bank to hand over deal logs and other information relating to three separate stop loss orders the firm left with HSBC is 2006. A source familiar with the matter tells Profit & Loss that ECU questioned the bank over market behaviour around the stops, but was told there was nothing untoward going on.
BNP Fined by DFS for “Unsafe and Unsound” FX Conduct BNP Paribas has been fined $350 million as part of a consent order entered into with the New York State Department of Financial Services (DFS) for “significant, long-term violations of New York banking law” in the bank’s global foreign-exchange business. DFS says its investigation found the improper conduct at BNP included collusive activity by traders to manipulate FX prices and benchmark rates; executing fake trades to influence the exchange rates of emerging market currencies; and improperly sharing confidential customer information with traders at other large banks.
Change at the Top of Deutsche’s FX Business Russell Lascala and Jon Tinker have been named as co-heads of FX at Deutsche Bank, reporting to Sam Wisnia, head of rates, who is now running an newly aligned rates and FX business. The two men replace David Wayne, who has been appointed to a new role running electronic trading across asset classes at the bank as it brings together its electronic trading capabilities. Wayne will report to Garth Ritchie, co-head of Deutsche’s Corporate and Investment Bank as well as assume leadership of the bank’s strategic analytics teams across CIB
A Full Set for ASIC as Macquarie Accepts Enforcement Undertaking Following similar settlements from the big four Australian banks, Macquarie Bank has also accepted an enforceable undertaking (EU) from the Australian Securities Investment Commission (ASIC) in relation to the bank’s FX businesses. Following an investigation, the regulator says it is concerned that the bank failed to ensure that its systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC. This settlement means that the top five Australian banks have all agreed to EUs from ASIC relating to their FX business.
CLS Data Shows Dip in FX Volumes The average daily volume (ADV) submitted to CLS in April was $1.52 trillion, down 5% from the ADV of $1.6 trillion that it reported in March. The ADV of spot FX trades submitted to CLS was $435 billion in April 2017, down 5.8% month-on-month and down 8% year-on-year. The ADV of swaps trades submitted to CLS was $988 billion in April, down 4.9% from the previous month, but up 1.2% compared to April 2016. Similarly, the ADV of forwards trades submitted to CLS was down month-on-month, but up year-on-year. CLS reported an ADV of $93 billion for forwards products in April, down 2.1% from March, but up 24% compared to April 2016.
Study: FX Dealers Narrowing Focus to Chase Profits A new study from Greenwich Associates suggests that FX dealers are narrowing their focus in terms of which products and clients they will cover. For the study, Greenwich says that it conducted interviews with 2,393 corporate and financial users of foreign exchange around the world about market trends and their relationships with their dealers. The results showed that, for the second consecutive year, significant market share was redistributed among the dealers in the top ranks of the FX market in 2016, with some leading dealers adding as much as two full percentage points in market share and others ceding similar amounts.