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FX Volumes Slightly Lower: Surveys The latest round of FX committee semi-annual turnover surveys indicate that activity globally dipped slightly in October 2017 from the previous April, but was up year-on-year. The US was the bright point amongst the surveys, showing a 6.2% rise from April 2017’s level and 7.2% higher than the previous October, while the UK, still easily the world’s largest FX market, saw activity decline by 4.3% from April, however it was up 5.4% year-on-year. Elsewhere, all centres saw slightly higher activity from the April 2017 survey, however Singapore and Canada were up on a year-on-year basis while Japan and Australia declined slightly.
UK Businesses Increase FX Hedging Ahead of Brexit As UK businesses prepare for Brexit, small firms are managing their FX risk more and more as they look to increase trade internationally, and exporters forecast increased growth in FX turnover, according to a new report from East and Partners released this week. Following interviews with 2,211 UK corporates, East and Partners has revealed that 25% of micro businesses and over 40% of SMEs used FX forwards in the second half of 2017, an increase of 16% and 15%, respectively, over the last six months. The report also shows that larger businesses are also using hedging options on a more regular basis, with nearly half indicating their use. “Awareness and understanding around the benefits of FX risk management solutions has clearly hit home with UK small business, leading to record highs in its usage,” says Simon Kleine, business lead at East and Partners Europe.
NEX Group Sees Increased Revenues NEX Group has unveiled increased revenues for the six months to September 2017, however operating profit has dipped. Nex Markets performed well, however, and contributed to the increased revenues. Nex says that revenue was £287 million, up from £254 million in the same period last year, a 13% increase that is trimmed to 7% on a constant currency basis. Meanwhile, trading operating profit fell from £75 million to £63 million and its trading operating profit margin fell from 30% to 22%.
BNP Signs Treasuries Deal with GTS BNP Paribas and non-bank market making firm GTS, have announced a strategic collaboration, which they say, marks “a new era for banks and electronic market makers”. Under terms of the strategic collaboration, BNP Paribas will seek to improve the client experience by providing improved pricing in the secondary market for US Treasuries by the addition of GTS liquidity into its pricing framework. A dedicated team from both firms will leverage a mutually developed technology platform that seeks to provide BNP Paribas with access to greater liquidity.
NEX Markets Launches NEX Quant Analytics NEX Markets has launched a new suite of analytical tools on its EBS FX trading platform that seeks to match the sophistication levels of those available at banks and trading firms, however at market level. NEX Quant Analytics was launched today and uses benchmark data taken from the entire EBS ecosystem. It delivers “real and measurable” insight for clients into their own trading activities and the ability to look at their performance versus that of their peers. With execution quality taking a more prominent role in FX market participants’ thinking, especially around their market impact, the timing would appear to be good for the firm.
FMSB Annual Report Highlights Progress made in FICC Reform The UK’s FICC Markets Standard Board (FMSB) has issued its 2017 Annual Report setting out the progress it has made to enhance standards of behaviour in the wholesale fixed income, currencies and commodities markets. FMSB was established in 2015 following the recommendations of the Fair and Effective Markets Review (FEMR), which was conducted by the Bank of England, the UK Treasury and the UK’s Financial Conduct Authority. FMSB says it has achieved “significant momentum and has received strong support from market participants and public authorities”.
BIS Paper: Should FX Swaps be Visible on Balance Sheets? A new paper published by the Bank for International Settlements (BIS) asks the question, what would balance sheets look like if the borrowing through FX swaps and forwards were recorded on-balance sheet, as the functionally equivalent repo debt is? The authors of the report, FX Swaps and Forwards: Missing Global Debt? observe that these products “create debt-like obligations” and state that non-banks outside the US owe large sums of dollars off-balance sheet through these instruments. They add that the total is of a size similar to, and probably exceeding, the $10.7 trillion of on-balance sheet dollar debt.
Fed Seeks Feedback on Libor Replacement The Federal Reserve Board has requested public comment on a proposal for the Federal Reserve Bank of New York, in cooperation with the Office of Financial Research, to produce three new reference rates based on overnight repurchase agreement (repo) transactions secured by Treasuries. These rates will replace the existing London Interbank Offered Rate (Libor) mechanism as the benchmark for interest rates and the new proposed benchmarks are a Tri-party General Collateral Rate (TGCR), a Broad General Collateral Rate (BGCR), and a Secured Overnight Financing Rate (SOFR).
NEX Launches EBS Benchmarks NEX Data has unveiled the ‘EBS FX Benchmarks’, a series of 30-minute FX fixings. The new fixings went live on 26 July 2017 and, the firms says, “enhance the variety of global benchmarks available, bringing increased transparency to all FX market participants”. The benchmarks are based on actual transactions and orders during the ten minute fixing window on Nex Markets’ EBS FX central limit order book. The fixings are published 24 hours a day, five days a week and include the full list of core EBS currencies.
UK Drives FX Turnover Growth Foreign exchange turnover rose in April 2017 compared to October and April 2016 thanks mainly to a surge in activity in the UK. Six regional foreign exchange committees have released their latest semi-annual reports on FX turnover and together they indicate a 5.3% increase from October and a 2.8 rise on activity in April 2016.Overall the data from the committees suggest a slight increase in global activity and were the Bank for International Settlements to produce an annual turnover report instead of the current triennial report, it would indicate the FX market is now a $5.23 trillion per day industry.