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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.
New Paper Challenges the Perception of Bank Liquidity in FX A new research note from Pragma Securities is seeking to challenge the perception that banks are increasingly stepping back from providing liquidity to FX markets. The firm notes in the paper that the “typical narrative” is that
 reduced appetite for risk, controls on 
capital at banks, as well as juniorisation of dealer staff have all contributed to this withdrawal that led to an “increased fragility of the FX markets”. The paper adds that the general consensus seems 
to be that liquidity is getting more expensive, and while spreads are
 narrow in times of normal volatility, in
 times of market stress dealers effectively pull away from the markets, contributing to extreme volatility and events like flash crashes. 

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.