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T3 Unveils EM FX Index Investors looking for exposure to emerging markets FX have limited options, with most EM indices offering exposure (currency hedged or otherwise) to local equity and bond markets. They will soon have the opportunity to invest directly in EM FX markets, however as T3Index is set to launch its E8 index, which it says it a first of its kind as it measures the performance of the world’s eight largest emerging market exchange rates. T3Index is a research driven financial indexing firm that specialises in derivatives benchmarking and the development of investible, proprietary indices that track related strategies across a range of asset classes.
Nex Launches Yen Benchmark Nex Data, a Nex Group business which delivers independent market intelligence and price information for OTC data and Nex Markets, a NEX Group business which provides electronic trading technology and services, have launched the EBS JPY Benchmark, which it claims is the first fully electronic, transaction-backed reference rate for the Japanese yen. Nex says the creation of the reference rate for JPY seeks to provide high standards across the market.Reflecting the USD/JPY rate, the new benchmark is published daily at 15:00 Tokyo time.
Derivatives’ Positions Outstanding Decrease: BIS The increase in OTC derivatives positions that took place in the first half of 2016 reversed in the second half according to the latest data from the Bank for International Settlements (BIS). The notional amount of outstanding OTC derivatives declined from $553 trillion to $483 trillion between end-June and end-December 2016, and their gross market value – the cost of replacing all outstanding contracts at current market prices – fell from $21 trillion to $15 trillion over the same period.
UBS, JP Morgan Carry off Top Honours in Digital FX Awards For the second year in succession, UBS and JP Morgan have won the top two prizes in Profit & Loss’s Digital FX Awards. For the fourth year in succession, UBS’s Neo won Best Platform, it was also named as Best Rates Platform and Best Structured Products Platform. Of note, UBS also won an unprecedented 10th Post Trade Award in a row. Meanwhile JP Morgan reinforced its success from 2016 when it first won Best FX Platform by carrying off the award again in 2017. The bank also added three others to notch four trophies for the first time in the Digital FX Awards’ 15-year history.
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.