Tag: ECNs

ECNs

The FX Tape, What’s Different This Time Round?

The consolidated tape for FX launched by FastMatch today looks very different to the one initially proposed by its CEO, Dmitri Galinov. Galen Stops takes a look at what’s changed.

FastMatch has today announced plans to launch a consolidated tape for FX, something that its CEO, Dmitri Galinov, has been working towards for some time.

Profit & Loss previously reported on an earlier proposed iteration of this tape back in May 2016, but the one launched today looks significantly different.

The Reality Check

Much has been made of the sharp drop in spot FX volumes in the recent BIS Turnover Survey, but, Colin Lambert asks, is what we are seeing merely a return to a longer term trend?

A regular theme in Profit & Loss over the past two years has been, since the traumatic events of January 15, 2015 around the Swiss franc peg, the return to relationship trading at the expense of the all-to-all model.

Analysis and data recently released by the Bank for International Settlements based upon its recent Triennial Central Bank Survey of FX Turnover appears to support the notion that the FX market is losing its infatuation with market share at all costs and is much more choosy about who it deals with.

FX Platforms: Optimism Abounds for 2017

Galen Stops looks back at how the OTC FX platforms fared in 2016 and talks to them about their strategic plans for 2017.

Speaking to platform providers at the end of 2015 about their prospects for the next year, they were all fairly bullish that a period of subdued volatility, and subsequently trading volumes, was about to come to an end.

And on the surface, the reasons they cited for this optimism were logical. The US Federal Reserve had just approved a quarter-point increase in its target funds rate, the first change in rates since 2009 and the first increase since 2006. Many hoped that further rate increases were coming and that interest rate differentials might start to produce trading opportunities and therefore lift FX volumes.

The 2017 Profit & Loss Crystal Ball

Colin Lambert has retrieved the trusty Profit & Loss Crystal Ball from the dark recesses of the office, given it a wipe, and peered into the future to produce 10 predictions for 2017.

There is little doubt that as an industry foreign exchange is a more optimistic place than it was just 12 months ago – and hopefully the majority of themes in this year’s Crystal Ball reflect a more upbeat message.

es, the coming year will not be without the challenges of legal battles that have dogged the industry for the past three years, but if nothing else the shock factor has worn off and most people see what is happening as the continuation of a long process.

Has it Become Harder to Find Alpha in FX?

It’s not necessarily that extracting alpha in FX has become harder, but rather that the way it needs to be extracted is changing, said panellists at Profit & Loss’ Forex Network Chicago conference.

Douglas Cilento, global head of execution at AQR, opened the discussion by point out that FX has traditionally been viewed as a good market for generating alpha because there is a large segment of non-profit seeking market participants, there are inefficiencies in the market and, because currency is not something that can be bought and held with the expectation of a return, it is effectively a market without beta.

And Another Thing…

Changing the habits of a lifetime is a very difficult proposition in the foreign exchange industry, but is now a prudent time for some platform providers to have what will no doubt be some very difficult conversations with their liquidity consumers about actually paying for it?
FX liquidity is a more valuable commodity than ever and LPs continue to look at where they stream, what the value from that venue is, and how they can, if at all, warehouse the risk profitably.