Speaking at the Profit & Loss Forex Network New York conference, panellists outlined how they think the application of fintech solutions will shape the FX industry going forward.
Nick Solinger, president of FIA Tech, broke down three specific areas where he sees the potential for distributed ledger technology (DLT), or peer-to-peer technologies, to have a major impact on the FX industry.
Firstly, he highlighted how these technologies could change payments systems.
“The current market structure has been the primary limitation in terms of who can provide credit to whom and trade with whom and access the market on the same basis as a large, highly regulated dealer. So there is a focus on improving the payment network, and that will have potential implications upstream in terms of who can trade with whom,” said Solinger.
As the distinction between bank and non-bank liquidity continues to blur in FX, panellists at Forex Network New York discussed how market participants should differentiate between different liquidity providers.
Speaking at the event, Kevin Kimmel, global head of e-FX at Citadel Securities, claimed that when it comes to liquidity, the bank versus non-bank narrative “has played out” as a distinction between market makers, with clients instead focusing on the core attributes of each firm, such as their reliability and whether they warehouse risk.
On the day that the second and final phase of the FX Global Code of Conduct was released, panellists at Forex Network New York debated whether it puts an unnecessary burden on buy side firms.
Philip Weisberg, a member of the Market Participants Group (MPG) that helped craft the Code, stated that it “puts an enormous responsibility on the buy side”.
Giving an example of this responsibility, he pointed to last look, a practice that some platforms do not allow and others allow to be implemented in a variety of ways. The platforms must disclose their last look policies, meaning that buy side firms need “to have some type of framework for evaluating the efficacy of a venue or liquidity provider choice or execution choice”, Weisberg explained.
The 2017 Profit & Loss Forex Network New York Conference in pictures.
Profit & Loss Forex Network New York took place on May 25, coinciding with the publishing of the FX Global Code of Conduct. More than 300 senior FX executives from across the banking and buy sides, as well as technology service provider sectors came together to discuss the most pressing issues facing the FX industry, including how to comply with the newly minted Global Code.
The full-day conference featured a new Sponsors’ Lounge, where attendees gathered to network between business sessions and demo the latest technology on offer.
The Profit & Loss Hall of Fame induction and The FoXys Readers’ Choice Awards took place over lunch, where the room was packed for a special honoree, Rita Saverino, and two-dozen banks, platforms and technology providers were recognized for outstanding services.
The Foreign Exchange Professionals Association (FXPA) is hosting a webinar on Wednesday, May 31, that looks at “How Does the Global Code Apply to Me?” at the following times: 10am (Eastern US) / 15:00 (UK) / 10pm (Singapore).
Webinar participants include Chip Lowry, Senior Managing Director at State Street Global Markets and Chair of FXPA; Lisa Shemie, Associate Counsel at Bats Global Markets, a CBOE Company and Member of the FXPA Policy Committee; Tahreem Kampton, Senior Director, Microsoft and Board Member of FXPA; and David Puth, Chair of the Market Participants Group for the Global Code, and CEO of CLS.
Technological developments present new challenges to both financial services firms and their staff, warned John Ashworth, CEO of Caplin Systems, at Forex Network London.
In a presentation "The Fourth Industrial Revolution: Society, Finance, Trading & Sales", Ashworth opened the discussion by questioning the assumption that the advance of technology is unambiguously good for business.
“The notion that an entry level economist would invite you to believe is that technology is a good thing, that technology delivers productivity, that productivity delivers advancement, that opens up new markets, and so forth. The reality is somewhat different,” he said.
Following his retirement from Citi, where he spent nearly 30 years and most recently served as global head of G10 FX, James Bindler, reflected at Forex Network London about the changes that he’s observed in the industry.
He’s also made a number of predictions regarding its future.
1. The line between banks and non-banks will continue to blur
“As always with all these things, it comes from both sides of the equation. Banks will get faster and high-frequency traders will seek capital to backstop their risk taking activities,” said Bindler.
Discussing the challenges facing market makers, Bindler noted that the cost of FX trading is generally rising, particularly for firms that need to use prime brokers to access the market.
Next week, more than 200 FX professionals will gather at Forex Network New York to hear industry leaders debate the most pressing issues in the market today.
May 25 marks the release of the Global Code for the FX industry – a global set of principles guiding good market practice – which has been developed by The Bank for International Settlements’ )BIS) FX Working Group, which consists of market participants as well as central banks from 16 jurisdictions.
James Bergin, SVP and deputy general counsel at the Federal Reserve Bank of New York, will introduce a panel that will discuss the issues of note within the Global Code.
After the Bank for International Settlements (BIS) Triennial FX Survey revealed last year that the industry has shrunk in terms of notional volumes for the first time in 15 years, speakers at Forex Network London outlined the factors that could help this market get back to growth.
During the discussion the speakers on the panel outlined a number of issues that have constrained trading volumes over the past three years, including technology shortcomings, a lack of investment in some areas of the market, and regulatory challenges.
Against this background, the question was put to the panellists, how does the FX industry get back to the kind sustainable growth that it witnessed between 2001 and 2016?
Speakers at Profit & Loss’ Forex Network London tried to “de-mystify” blockchain technology as they talked about its practical applications within the financial services industry.
Andy Coyne, CEO of Cobalt DL, explained that when he first began looking at how blockchain technology could be applied to post-trade FX he found that there was a lot of noise and hype around the technology, but that there was a dearth of companies actually ready to implement it in a practical manner.
Coyne said that he looked at the issue that his firm was trying to solve, which was how to reduce cost and risk in post-trade processes, and then started examining if and how this technology could help.