FIA PTG Calls for “Data-Driven” Discussion on Liquidity

As part of what it terms a continuing effort to foster a productive, data-driven discussion about the nature of liquidity and liquidity provision, FIA PTG has released a white paper entitled Liquidity in Today’s Markets that seeks to promote principles that it says are fundamental to building healthy, liquid markets. The paper includes recommendations detailing what the association believes to be the general parameters necessary to promote liquidity, thereby establishing a basis for further discussion between market participants and regulators.
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Markets, Ratings Agencies Divided Over “Too Big to Fail”

A new blog by economists at the Federal Reserve Bank of New York (NY Fed) shows that ratings agencies and financial markets are divided about whether the Dodd-Frank Act has significantly reduced the “too big to fail” problem. Noting that one of the goals of Dodd-Frank was to end “too big to fail”, the blog points out that to this end, the Act required systemically important financial institutions to submit detailed plans for an orderly resolution (“living wills”) and authorised the Federal Deposit Insurance Corporation (FDIC) to create an alternative resolution procedure. The response from the FDIC was to create a “single point of entry” (SPOE) strategy, announced in December 2013, in which healthy parent companies bear the losses of their failing subsidiaries.
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InTouch FX Expands into North America

Market intelligence provider InTouch FX, part of the InTouch FX Capital markets Group, has expanded its coverage to cover North American hours with the hire of Adrian Thong who will lead the service. Thong joins after a long career in trading and portfolio management. He spent 18-years at Citibank, where he traded a variety of products and helped develop the bank’s electronic NDF pricing platforms. He has also worked at a LatAm-focused hedge fund and more recently at broker GFI.
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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.
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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”.
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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.
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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.
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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.
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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.
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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.
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