Rather than moving in a synchronised manner, speakers at the Profit & Loss Forex Network Chicago conference predicted that emerging market (EM) performance has become divergent due to idiosyncratic factors within each country.
“In general, EM does well when you have at least two out of three things: one is global growth, two is a weak dollar, and three is lower US rates. So, if you look at this combination and where we are in the cycle, especially given all the easy money that we’ve had since 2008, I would be very careful with the emerging markets right now,” said Mo Grimeh, CIO at Mogador Capital Management at Profit & Loss Forex Network Chicago.
The sixth in Profit & Loss’ hugely successful Scandinavian conference series takes place next Thursday (October 11) in Stockholm at the Hotel at Six. In partnership with ACI Sweden & ACI Denmark, the conference showcases industry experts across banking, tech and trading, who will deliver key insights on today’s biggest challenges.
The conference will be headlined by a keynote address from Cecilia Skingsley, deputy governor, Sveriges Riksbank, and features panels on a range of subjects from the macro outlook, through to critical market structure issues such as managing risk in machine driven markets.
With insights from a range of experts from the quant, macro, trading, technology sectors on both the buy and sell side, this event is a must attend. To attend, Register here.
Forex Network Chicago features two panels looking at the most important subject of liquidity provision in FX markets through two very different prisms. The first looks at the issue from the perspective of FX banks; how are they prioritising where they send liquidity and how are data capabilities changing how clients are evaluated? It will also look at the role of buy side as genuine liquidity providers and look at the impact on market conditions if what some consider to be a withdrawal from the market by the banks takes place.
Profit & Loss’s latest OnTheBlock series featured a one-one-one discussion with former CFTC staffer Justin Slaughter, now a partner at Mercury Strategies, in which he provided an insider’s perspective on how cryptoassets are being viewed by regulators in Washington, DC.
P&L OnTheBlock: An SEC official recently said that the agency does not view ether[eum] as a security. Does this mean that the issue is settled and the SEC definitely won’t try and regulate it as a security now?
Justin Slaughter: What we are basically hearing is that there isn’t an explicit, major problem with ether as a security. They are not yet saying it's totally, absolutely, not a security.
Despite a decline of investment into actively managed FX funds in recent years, speakers at the Profit & Loss Forex Network New York conference expressed optimism for these funds.
Chris Solarz, a managing director at Cliffwater, a firm that provides investment advisory services, explained that hedge fund strategies in general have struggled to outperform indices since the financial crisis, both on an absolute and relative basis.
“Someone mentioned on an earlier panel that it’s not fair to compare hedge fund strategies, hedge fund indices, to the S&P - but in the industry 10 years ago, that’s not at all how we were selling it.
There is one question regarding cryptocurrencies, and Bitcoin in particular, that has continued to baffle many, and has caused some skepticism amongst market commentators, namely what is the fundamental value of these assets?
Bitcoin, still by far the largest cryptocurrency that exists, is not a good store of value because the price of a bitcoin is so volatile. As a result, it functions poorly as a currency, after all, no one wants to buy something worth $100 with bitcoins if those same bitcoins are going to be worth $200 a few months later and no one wants to sell an item worth $100 for bitcoins, because those coins could be worth $50 shortly after the transaction.
The increasing use of AI technology is likely to create incumbent firms that dominate markets, said panellists at the Profit & Loss Forex Network New York conference. However, they also said it might not be the biggest firms in the markets today that become these incumbents.
“I think [AI] is changing the landscape quite a bit,” said Andrej Rusakov, a partner at Data Capital Management, a hedge fund that uses AI tools to develop trading strategies. “People who are missing the wave are going to be left behind, I don’t think there’s any question about it. I think that human day traders will be wiped out, if they’re not already.”
From a regulatory perspective, one of the challenges around operating in the crypto markets is that different regulators appear to define cryptoassets in different ways.
For example, the Commodity Futures Trading Commission (CFTC) has defined digital currencies as commodities, while the Securities and Exchange Commission (SEC) seems to think that at least some of them might be securities.
Speaking at Profit & Loss Forex Network New York, Mike Gill, chief of staff to US CFTC chairman, Christopher Giancarlo, and the CFTC’s COO, discussed some of the challenges facing regulators when it comes to defining these products.
Even when implementing passive currency hedging strategies, it’s still important to think in terms of alpha, explained Jay Moore, a senior vice president at Brown Brothers Harriman (BBH), during a panel discussion at the Profit & Loss Forex Network New York conference.
Although this might initially seem to be a contradictory statement, Moore explained that providers of passive hedging services can differentiate themselves both through risk management and what he termed “operational alpha”.
While portfolio risk obviously isn’t a concern when implementing passive currency strategies, Moore explained that there is a strong focus on managing other types of risk, such as regulatory risk, operational risk and managing the fiduciary risk that managers have on behalf of the funds that they outsource to firms that are providing the passive hedging.
Artificial intelligence (AI) and machine learning have become buzzwords in financial services, but while this technology can be applied in finance in numerous ways to improve returns, it also has some significant limitations that market participants should be aware of.
This was the message from speakers at the Profit & Loss Forex Network New York conference, on a panel discussion titled “AI: Regular Quants with a Bigger Bazooka?”
“In my mind the biggest problem with machine learning in its application to finance is the problem of non-stationarity.