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BoE Paper Cites Opposite Impacts of Human and Automated FX Traders A new working paper from the Bank of England analyses the role of automated trading (AT) in FX markets in a period containing the 15 January 2015 announcement by the Swiss National Bank that it had removed its EUR/CHF floor and finds that while AT “generated uninformed volatility”, human traders did the opposite. “This ‘Swiss franc event’ represents a natural experiment as one of the largest shocks to the FX market in recent years and probably the most significant ‘black swan’ event in the period in which AT has been a prominent force in FX markets,” the paper states.
Greenwich Report Sees Algos Becoming “Increasingly Popular” in FX A new report from Greenwich Associates sees algorithmic execution becoming “increasingly popular” among FX traders and argues that traders currently not using the strategies, “may soon have to determine whether they’re putting themselves at a disadvantage by not leveraging all the available tools to achieve the best outcomes for their institution and clients.” The report does observe that many buy side traders remain reluctant to opt for fee-based execution, although it argues that those that have used algos have discovered that their overall execution costs have dropped “meaningfully”.
Bitcoin Plummets Amid Negative Press The price of bitcoin keeps tumbling, dipping below $8,000 for the first time since November, following a wave of negative press stories regarding cryptocurrencies. At the time of writing, 10.45am EST on February 5, the price of bitcoin was $7,410, according to Coindesk, down from $10,166 at the end of January and down from $13,412 at the start of 2018. On January 30, Facebook announced in a blog post by Rob Leathern, its product management director, that it has banned advertising for cryptocurrency products on the social media platform. “We’ve created a new policy that prohibits ads that promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings and cryptocurrency,” says Leathern in the blog.
Updated Story: Lucid Markets Shuts Down Market sources tell Profit & Loss that Lucid Markets has sent out a communication to all clients stating it is closing its business effective immediately. The firm, which is majority owned by FXCM, which holds a 50.1% stake through its UK arm, is a electronic market maker in FX. Although there is surprise at the suddenness of the announcement and the immediate closure, Lucid has been, according to its latest filing in mid-2017, “actively marketed for sale” by FXCM as the latter continues to divest itself of assets following its rescue by Leucadia in early 2015.
Blackstone Buys $17 Billion Stake in Thomson Reuters Financial & Risk US private equity group Blackstone has agreed to buy 55% of the Financial and Risk (F&R) business of Thomson Reuters – a unit that includes the trading platforms owned by the firm. The deal values the F&R Division at $20 billion the firms say, adding that Thomson Reuters will receive around $17 billion in gross proceeds, roughly what – in dollar terms – Thomson Corporation paid for Reuters when it bought it in 2008. Thomson Reuters will retain the news service as well as the legal and tax and accounting divisions, it would also retain a 45% stake in the new business, which will provide news, data, analytics and trading services.
Raised Eyebrows at EUR Flash Crash Report A story by Bloomberg News has prompted some head-scratching amongst FX dealers after the service reported a flash crash in EUR/USD on Christmas Day, December 25. The report says that at around 7.30am New York time on the 25th, EUR/USD plunged from 1.1860 to 1.1550 before rebounding to 1.1650 and then recovering all the way back to 1.1850 just a couple of hours later. The Bloomberg report states, “The sudden plunge could’ve been sparked by computer-driven trading,” however dealers spoken to by Profit & Loss say their records and systems are showing nothing.
Bitcoin Futures Launch But The Song Remains the Same CBOE officially launched trading on bitcoin futures on Monday morning in Asia and while the event was much anticipated, price action has generally conformed to that of the past year with the price of the cryptocurrency rising steadily. Trading on the front month contract started at $15,460 with the cash exchanges trading around $15,000, but after some early whippy price action that saw the price rise to $16,630 and then fall back to the opening level, buyers re-emerged, sending the futures to $18,700 and a trading halt on CBOE.
New Report Offers “Flash Crash” Definition Pragma Securities has released a new report that analyses FX spot market data in order to provide a more accurate definition of exactly what constitutes a “flash crash”. Arguing that previous reports on flash crashes “have tended to look at individual events in isolation” and that “discussion of the recent trend at industry events has been correspondingly anecdotal”, the paper attempts to define what a flash crash is and then systematically track the incidences of flash crashes using this definition.
Bitcoin Breaks the $10,000 Mark The value of bitcoin (BTC) soared to over $10,000 today, a 900% increase in value from the start of the year. Despite significant price dips in July, September and November, bitcoin has been on a consistent and stark upward trend since January, when it was valued at $1,000 per bitcoin. “Bitcoin has sailed past a number of surprising milestones this year, with the $10,000-mark achieved today the most significant so far. With its rising valuation built on the bitcoin buzz more than real worth, it’s likely that we won’t see bitcoin decline in value until it’s more widely accepted,” says Dennis de Jong, managing director at UFX.com.
LMAX Exchange Partners with Academia LMAX Exchange has unveiled a partnership with an academic at the University of Oxford to develop a methodology for consistent evaluation of trading costs across liquidity pools that can be used by the FX industry. Dr. Álvaro Cartea of the University of Oxford’s Mathematical Institute is a leading researcher and published finance expert specialising in high-frequency and algorithmic trading, market quality and financial regulation. Together, LMAX and Dr. Cartea aim to drive forward the industry’s understanding of FX TCA and produce mathematically robust findings of practical value to benefit all FX market participants, the firm says in a statement.