"It may be hard for an egg to turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. And you cannot go on indefinitely being just an ordinary, decent egg. We must be hatched or go bad."—C. S. LewisTransaction cost analysis (TCA) as we know it has already begun to go bad. Its origins in FX were really to allow asset managers to show their clients that their FX executions were in the right ballpark, but the new breed of buy-side FX traders (many of whom have moved from the sell-side) are looking for much deeper insights, such as:
Many FX participants are already reviewing their FX operating model, building support for FX clearing and Futures in addition to their OTC FX.
This is not in the belief that the entire FX market will move to a cleared model, but it is evident that pioneering firms are already staking their claim as well as exploiting the values that hybrid OTC and Cleared products can bring; blurring the historic lines that have previously separated bilateral FX models, PB’d access to markets, OTC clearing, and FX Futures
By Obi Nwosu, the CEO and co-founder of the cryptocurrency exchange, Coinfloor,
It has been a challenging financial environment for investors since the financial crisis, and difficult to achieve returns on deposits and short term investments. In response to this, many have been seeking alternative investment vehicles to diversify their portfolios. Bitcoin is never far from the media headlines – but what will it take to convert this volatile retail bet into a viable investment option?
The key lies in stablising its price. Cryptocurrency is, of course, decentralised, which means there is no central authority putting measures in place to govern its price or manage volatility. This instability is currently preventing cryptocurrency from acting as a store of value, and subsequently achieving its originally intended purpose as the future of money.
There is a lot of conversation around Artificial Intelligence (AI) among different participants in the institutional investing pyramid.
Investors are wondering if AI can get higher returns by extracting unexplored alphas or if it can reduce costs, and investment professionals are wondering how machine learning and AI will impact their businesses.
Right now there is a lot of exuberance, optimism, skepticism and fear around AI and the impact that it will have on financial markets. Here I explore five key questions that are important to ask regarding this technology and its role in finance.
One of the things that makes FX a truly unique market is both its scale and the diversity of the market participants that operate within it. Asset managers, corporates, international banks, regional and mid-tier banks, hedge funds and prop trading firms from all around the world have a real need to access the wholesale FX market.
In many cases though, today, this access occurs via credit intermediaries. This intermediary model places fundamental constraints on the credit available to clients and, subsequently, on the counterparties that they can access.
Retirement plan fiduciaries, who themselves or through a third party, engage in foreign exchange transactions on behalf of the plan, should be aware of the new FX Global Code (Code). The Code is a noble effort to repair the reputation of the wholesale FX market in the wake of scandals and controversies.
Though it does not have the force of law, it can serve as a useful springboard for fiduciaries to buttress risk controls and fiduciary awareness over an industry that seems obscure to some. The Code can catalyse a change from disengagement and insufficient understanding of common (and, in certain instances, controversial) FX practices to engagement and a deeper understanding of a market whose products are in so many investment policy statements and mandates of retirement plans.
There’s a wave of change sweeping across non-equity markets driven by regulatory initiatives and the rise of non-bank liquidity providers. Other factors driving buy-side adoption of Transaction Cost Analysis (TCA) in FX are the need to generate alpha on investment returns, and regulatory scrutiny
of trading practices in over-the-counter (OTC) instruments.
TCA is a broad term which doesn’t describe the actual analysis to be carried out. Asset managers who rely on custodian banks to execute currency trades have a compliance obligation to analyze these FX trading costs.
By monitoring fill rates, TCA tools can help traders determine if ‘last look’ is occurring, and then decide whether or not to shift their trades to other venues.
Viewpoint from Andrew Cromie, Global Head of
Product Management for Institutional Investors, 360T Group
In 2003 I was invited to a meeting with a large
global asset manager to discuss an electronic trading solution for their FX
business. In that meeting ...