The feedback period for Principle 17 of the Global Code - dealing with last look in FX markets - is over and we await the outcome. My understanding is that the outcome will not be as clear cut as many thought just a short while ago, but, sticking my neck on the line, I am happy to predict which way the decision will fall. After all, the legal industry is already circling FX on this issue - why give it more ammunition?
I have learnt a life lesson - never promise a colleague you will write a column involving a theme they have suggested. I just did and therefore I hereby give you some observations on how specific instances of misconduct have repeated over the years; my thoughts on the latest in what could be a long running saga involving FXCM; an opinion on how traders have borne the brunt of misconduct charges due to cultural weaknesses at their institutions; and hedgehogs!
The notoriety of me busting a Saturday Night Fever move on stage at Profit & Loss Stockholm last week is growing, therefore I will subtly(!) shift the direction of the conversation – but retain its musicality – by noting that I don't remember “Ebeneezer Goode” by The Shamen being a number one single in the UK. Equally I don’t think I have ever listened to “Tubular Bells II” by Mike Oldfield. I was, however, very busy the week both hit the top of the charts.
It is amazing to me how many times issues come around in FX markets, as if it is on a regular cycle I am being told of shenanigans (again) ahead of data releases.
This week, UK retail sales came in stronger than expected, but a short while before the release sterling jumped. The same happened in the Australian dollar about two weeks ago, but at the time I chose to dismiss it as an one off – clearly it wasn’t.
Today we tip-toe into delicate (and to me largely unknown) territory. It remains to be seen whether or not Bitcoin will be a true phenomenon that changes the world – my instinct is still that it will inevitably be reigned in by “The Man” and become as regulated as fiat currencies – but whether or not it does revolutionise the global economy and indeed financial markets, I have a couple of concerns about how it is being treated by some brokers.
Earlier this year I wrote about my mystification over people bemoaning the lack of opportunity in FX markets, claiming there were indeed plenty of chances to make (and lose!) money, because the rather fragile geo-political situation and multi-speed economic performance around the world is providing opportunities.
In FX terms market conditions seem to have changed for the better, at least for some participants. We could be witnessing a revival for the trader, and if that is the case I, for one, will be very happy.
While I am generally unconcerned about the FX industry's preparedness for MiFID II - it has a long and proud history of hitting deadlines - I am bothered by a potential psychological impact from the legislation. Too many are looking at TCA in the light of MiFID II and thinking "box-ticking", to the extent that TCA reports are left unread and even un-opened. The data is good, and it should be used to make execution better, not to fulfil a compliance exercise.
As often seems the case when the emotive subject comes up, Thursday’s column on one aspect of last look prompted my messaging channels to go into meltdown. Amongst the feedback were a few suggested answers to my question that asked why there would be asymmetric response times from a small number of LPs and I thought, today being a UK holiday and likely to be quiet, I would share these and let the readership decide for itself what it thinks.
We’re back on asymmetric response times because I have new data from another platform that highlights the absolute – and to me mystifying – divide in the industry over how much longer it takes to accept or reject a trade. I am really confused over how 16 LPs can take much longer to reject a trade than accept, while another 16 take longer to accept than reject. Someone out there must have a reasonable explanation but I’m blowed if I can come up with one.
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.