More than six years ago I started talking about high frequency trading "eating itself" and the latest deal in this world seems to suggest the feast is well underway. Rather than seeing this, as many media outlets do, as being driven by lower volatility and volume in markets, I think it is more about competition. And nowhere is this competitive impact better highlighted than in the story of the planned building of two radio masts on the coast of England.
Back in the early years of this century the path to success for a multi-participant platform in the FX world was lined with customers – genuine buy siders. If a platform could get the customers on their venue the banks – for it was the banks alone back then that were providing the liquidity – would follow.
This has pretty much been the case ever since, however I sense that the next year could see the seeds sown leading to a significant shift in this landscape.
To great cheers and joy unbridled, today’s column is not about last look! Instead, and I have to stress I am unsure of the answer to this, I thought I would ask the question – should the FX market shut down for a few minutes every day?
At the moment, the admin processes just after the New York close seem a mish-mash that could do with being consolidated across the industry so would a two minute window, during which no trading is allowed, help?
Before getting onto today’s subject matter – which is last look – I wanted to clarify something from Monday’s column – which was about last look!
Some in the industry are definitely moving towards the moral high ground on this issue and along the way, hopefully, they will squeeze out those that still wish to abuse the practice. New initiatives and growing support for a crucial change mean I am, possibly for the first time, vaguely optimistic the problem of last look will be solved.
I fundamentally believe that last look remains the biggest threat to the industry’s development and recovery from past ills, and to help build understanding further you have five weeks or so to submit your feedback as requested by the Global FX Committee on the language in Principle 17. I suspect I may have some bad news for the GFXC, though, because while there is consensus around the specific language, there also seems to be a consensus that it does not cover the subject in enough depth.
Traders do like to moan – I know I did – maybe because it’s therapeutic, maybe because it is (occasionally) true that they are unlucky. More often than not though, it’s because they’re wrong. That said, looking at those indices that track global macro, and listening to traders around the world, it does genuinely appear to be a struggle to make money in FX and rates at the moment. But why is that? We have events - we even have a trend!
Many years ago I interviewed then EBS CEO Jack Jeffery, and one soundbite from that chat sticks with me to this day. When asked about his growth ambitions for what was already the biggest spot platform he answered simply, “Credibility in all currency pairs”.
Under its new guise of Nex Markets I am told the latest attempt is underway to build Cable market share, but I would not be surprised if it represents something of a controversial move and may actually cause people to question whether EBS Market can ever be relevant in Cable.
Today's column is all about numbers and confirms something that I have always argued about the legal actions facing many of the banks in the foreign exchange industry. It focuses on a settlement which was originally proposed and agreed in February 2016 and, for some reason known only to the US legal system, finally approved (in its original form I should point out) by a US court late last week. Notwithstanding the delay, the numbers make for very interesting reading...
Whilst the publicity associated with the issue is unwelcome and untimely, last week’s revelation that a group of banks face a lawsuit over their use of (although it is probably more accurate to say ‘lack of disclosure of’) last look should have focused a few minds on the feedback process being run by the recently-formed Global FX Committee.
We need to be clear about this – if this lawsuit is settled or lost by the banks then more will inevitably follow.
I am very grateful for the responses to Thursday’s column, ranging from congratulations, through jokes, to guesses as to exactly what event triggered the Cable drop I was talking of. On the latter the favourite was the infamous (and possibly apocryphal) story of the “Carrier Down” message, but I think it was later than that.
Either way, to complete my self –indulgent look at my top 10 events from my 40 years in foreign exchange, here are the top five.