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SNB Continues to Intervene in FX Markets The Swiss National Bank continued to intervene in foreign exchange markets in 2016 with the intention of averting Swiss franc strength. According to the central bank’s latest annual report, it bought a total of CHF 67.1 billion in foreign currency, from CHF 86.1 billion in 2015. The latter included intervention in the two weeks ahead of the central bank removing the EUR/CHF floor on January 15, 2015. The SNB’s reported a profit of CHF 24.5 billion in 2016, following a loss of CHF 23.3 billion in the previous year.
Virtu Bids for KCG Broker dealer KCG Holdings has confirmed it has received an “unsolicited” offer from rival firm Virtu Financial to take over the company. According to a statement from the firm Virtu is offering between $18.50 and $20 per share, which would value the firm at an estimated $1.3 billion. In a statement, KCG says its board of directors “is reviewing, in consultation with its financial and legal advisors, Virtu's proposal in the context of KCG's strategic plans to create shareholder value”.
Bank of Canada Commences New Reference Rate Publication The Bank of Canada has followed through on a plan to change how it publishes reference FX rates to reinforce the distinction between reference rates used for benchmark fixings and those for information purposes only. From March 1, Canada’s central bank began publishing new data for 26 currencies, and stressed they were “intended for statistical, analytical and informational purposes only”. The new rates are published once a day, by 16:30 Eastern time and represent a daily average rate for that currency against the Canadian dollar.
Less Volume, but More Automation Data from the UK’s FX Joint Standing Committee (JSC) shows that while overall volumes dropped, e-ratios in spot and across the broader market both rose from April. Meanwhile in the US survey spot e-ratios dipped slightly, as they did across all FX products. The JSC survey suggests the UK market had a spot e-ratio of 62.2%, the highest registered since the October 2012 survey. This is a significant increase on the 57.9% highlighted in the April 2016 survey and the 54.5% ratio in October 2015.
CLS Data Confirms December Dip Data from CLS reinforces that released earlier this month by trading platforms by indicating a month-on-month decline but a year-on-year rise in FX volumes.
BIS Report Sees FX Shift to Relationship Trading The latest Bank for International Settlements Quarterly Report carries a paper, Downsized FX Markets: Causes and Implications, which suggests that amongst the many structural shifts taking place in FX markets, a move towards relationship trading is underway. The authors suggest that this shift, along with the changes in the composition of market participants and their trading patterns may have “significant implications for market functioning and FX market liquidity resilience going forward”. The paper notes that trading with non-financial counterparties has fallen 20%, a reflection of reduced global trade flows. It argues, however, that conventional macroeconomic drivers alone cannot explain the evolution of FX volumes or their composition across counterparties or instruments.
INTL FCStone Becomes 25th Member of FXPA The Foreign Exchange Professionals Association (FXPA) has announced INTL FCStone as the newest Supporting Member of the FX trade group, bringing the total number of institutional members to 25. Edgar Ramon, global head of foreign exchange at INTL FCStone Markets, says: “We are proud to now be an FXPA member firm and to join with other members in education, research, and advocacy initiatives for the foreign exchange industry. As the first non-bank swap dealer, we are intimately familiar with the constantly changing FX landscape, and will leverage our significant knowledge to further the FXPA’s goal of advancing a sound global currency market.
Mixed Early News from FX Platforms The first trio of FX platforms to report FX volumes for October indicate little change from September’s numbers although they were clearly helped by increased activity surrounding the Cable flash crash on October 7. Bats Hotspot reports average daily volume (ADV) of $25.3 billion, a 10.6% decline from September, while FastMatch FX says its ADV was $13.6 billion, a fraction down from September’s $13.7 billion. Gain GTX handled $8.7 billion per day, up 3.5% month-on-month. Hotspot and FastMatch can be thankful for a very busy day on October 7, the day of the Cable flash crash, the former handling $37 billion that day and the latter $20.6 billion.
WM Fix Trading Still Predictable, But Less So: Pragma New research by Pragma Trading shows that while the situation has eased, there is still a degree of predictability around the direction of the London 4pm WM/Reuters Fix. In research last year, Pragma showed that the widespread use of TWAP (trade weighted average price) algorithms by executing agents during the Fix, had led to predictable trading patterns that were not only observable but also tradable, however it now says that the momentum pattern has “deteriorated to the point it provides no value”.
Exclusive: Currenex Launches X2 Platform for Institutional Clients Currenex has launched a new trading platform, X2, designed in response to the changing liquidity profile of the FX market and the evolving requirements of institutional FX traders. One important feature of the new platform is that it is based on HTML5 technology, in contrast to the Java-based multibank front ends that populate the market today. Speaking exclusively to Profit & Loss Rick Schonberg, global head of product for trading and clearing and the North American head of trading solutions at Currenex, says that although Java “serves its purpose today and will for many years”, there are advantages to having an HTML5-based front end.