FX markets are largely seen as mature in terms of market structure and technology, but what about fixed income markets? Colin Lambert talks to Steve Toland, founder of TransFICC about the complexities and challenges involved in modernising these markets.
He finds that while fixed income markets are behind FX markets in terms of market structure and automation, they are catching up quick, but the biggest challenge is the sheer breadth and complexity of products traded - often on the same desk.
The traditional Markets business model in banking is under pressure, Colin Lambert talks to Imed Souki, global head of FRC trading at UBS, and Christopher Purves, recently appointed head of UBS’ Strategic Development Lab for FRC, about how the bank is responding to a such a challenging environment.
Colin Lambert: UBS recently announced a change in structure for its FX, Rates and Credit (FRC) business, can you outline the new business model?
Imed Souki: There has not been a significant change in the structure of the business, it is really a continuation with me taking sole responsibility for the business today, whereas Chris is tasked with taking it where it needs to be in the future. The client relationship dynamic is changing and we want to ensure we are, and remain, relevant to our clients.
Michael Oved, co-founder of AirSwap, met with Profit & Loss to discuss his vision for the potential of a decentralised trading platform based on the Ethereum blockchain. Previously an algo trader at Virtu Financial, Oved explains how he took lessons from the FX market and applied them to crypto trading to create a peer-to-peer platform.
Profit & Loss: AirSwap was designed around an Indexer, which acts as a search engine, matching up buyers and sellers, rather than using an order book model. With your background as an algo trader at Virtu Financial, did you look to the FX market for ideas when developing AirSwap?
In an interview at Profit & Loss Latin America 2018 conference, Gary Flagler, Head of International Business Development, Derivatives, at MexDer, talked about the Mexican exchange’s future growth plans.
Profit & Loss: What's been your focus since you joined the exchange last year?
Gary Flagler: We can sum up our international initiative in one word and three parts, and that word is: Connectivity.
When I talk about connectivity, I'm talking about connectivity to international clients, whether they're professional trading groups, hedge funds, commodity trading advisors, asset managers and, to a lesser extent, banks, corporates, mutual funds, pension funds and retail.
Profit & Loss sat down with Javier Alvarado, Monex Casa de Bolsa CEO, and Eduardo Gomez, Subdirector of Operations for FX at Monex, to discuss the group’s acceptance by CLS as the first Mexican member firm. Javier Alvarado: Monex started 32 years ago and has evolved from a very small FX house into a bank with the biggest international payments for private companies in Mexico. Monex is a public company that has close to 20% market share of international private payments in Mexico, with a base of close to 70,000 active customers around the world, 45,000 of which are private corporates and companies in Mexico.
CoVenture operates a venture capital firm, a direct lending business, and CoVenture Crypto, a cryptocurrency asset management firm run by co-founders Ali Hamed and Nikhil Kalghatgi. CoVenture Crypto operates multiple strategies and is backed by a large, publicly traded financial institution. Ali Hamed: During my freshman year at Cornell, I launched a software startup, and after that I started doing Angel investing. I didn’t have the capacity to write anything larger than a $25,000 check at a time and would find that when I tried to invest in people, they'd say the money was great, but what they really needed was help building the product. That made us think about how ridiculous the venture capital business model is – where you put $50 million into a fund and give out $1 million at a time to kids who can code and hope they can start a company – it just made no sense to us.
Raj Sitlani, co-founder of IS Prime and managing director of ISAM Capital Markets, sat down with Profit & Loss in Shanghai to talk about the challenges associated with expanding into Asian FX markets and why technology remains the key differentiator for prime-of-primes.
Profit & Loss: So what’s your business focus in Asia?
Raj Sitlani: We have a large market share in Australia but, until recently, never truly had the manpower or the resources to crack the broader Asia market. However, there’s a very big opportunity in the region for us to provide our flagship product – which is a prime-of-prime service with aggregated FX liquidity – and so last year we set up a Hong Kong office through which we can build out our presence in North Asia and China.
Ian Battye, chief investment officer, currency, at Russell Investments, talks to Profit & Loss about the next steps for driving the adoption of the Global Code of Conduct within the FX industry.
Profit & Loss: The FX Global Code of Conduct has obviously been a big initiative within the industry, but how much do your clients – the asset owners – know about it?
Ian Battye: Perhaps a little disappointingly there isn’t a great knowledge of even its existence amongst asset owners. That’s why at the moment we’re trying to help create a level of awareness around the Code by explaining why we have signed up to it.
Profit & Loss talks to Zeus Shaikh, founder of Bear Shaikh, about the legal challenges associated with FX prime brokerage and how firms should be approaching blockchain technology.
Profit & Loss: You now run a “legal consulting firm”. What is that and how does it differ from a typical law firm?
Zeus Shaikh: At Bear Shaikh we’re looking to disrupt the way that financial services firms are serviced. Although there is some overlap between what we and law firms do, there are services that I offer that a law firm does not.
Profit & Loss talks to Tim McCourt, managing director and global head of equity products at CME, about why the Chicago exchange is planning to launch bitcoin futures before the end of the year.
Profit & Loss: So why has the CME decided to launch bitcoin futures?
Tim McCourt: We’re launching this futures contract off the back of customer demand. But a key thing for us is that this product isn’t necessarily something that’s new to the CME. We launched the Bitcoin Reference Rate a year ago, and so it makes very good sense – given the feedback and response that we’ve had from customers – that now is the right time to introduce a cash settled futures contract based on this index that tracks the bitcoin reference rate.